REAL ESTATE REPORT

"An economist is an expert who

will know tomorrow why the things he predicted yesterday didn't happen today."

- Laurence J. Peter As the seasons change and autumn colors sadly come and go, football metaphors abound - we have entered the fourth quarter, the final three months of the year. With the first three quarters of the year in the books, where are the dire predictions of a rapidly cooling real estate market? Or can our current market be best described as a "soft landing." Let's look at the statistics for the first nine months of 2006.

Currently, there are approximately 600 properties of all types (houses, land, condos, commercial properties) for sale on Nantucket - a decrease of about 10 percent from last month - though the price range is still the same, $225,000 to $23,000,000. Of these roughly 600 properties, about 90 are listings of vacant lots for sale ranging in price from $425,000 to $17,000,000, an increase of about 10 percent from last month.

So, the number of active listings has declined, though the number of vacant land listings has increased. Are prices coming down or what? What about actual sales as opposed to just listings?

Through September, there were fewer overall property transfers then there were at this point in 2005 (down 25 percent). The average home sale, based on all transactions through September 2006, stands at $2,447,000 (up 13 percent from all of 2005, and up 18 percent from this point in 2005). The median house sale is still inching higher as well at $1,600,000 (up 7 percent from all of 2005).

There have been 216 houses sold in the first nine months of 2006 for total sales of about $529 million, which is fewer than the 291 houses that sold by this point in 2005 and less than the total of $602 million in home sales at this point in 2005. At this pace, 2006 might still qualify as Nantucket's third billion-dollar real estate year in a row. But that is looking less and less likely.

Vacant land sales continue to surpass even the wildest predictions of any economist or casual market observer. For the first nine months of 2006, there were 43 vacant lot sales with an average vacant land sale of $2,100,000, up 66 percent above the average vacant land sale in 2005, and a median vacant land sale of $1,037,000, up 48 percent above the median vacant land sale in 2005.

To put this in perspective, the average vacant land sale in 2005 was $1,190,000; at the end of September 2006 the average vacant land sale was $2,100,000. That is nearly double in less than a year.

Of all the real estate changing hands on Nantucket so far in 2006, 70 percent of the sales have been over $1,000,000. With prices still rising at the upper end of the market, 53 percent of the sales have been over $2,000,000. Over half of all real estate sales on Nantucket are at a level of $2,000,000 or above. As for 'affordable housing,' only about 5 percent of the market changes hands for under $1,000,000.

As the national economy sends confusing signals about whether it's actually slowing or not, and many economists make dire predictions about the housing market, we are seeing some continuing residual effects here.

There have only been 115 single-family building permits issued in the first nine months of 2006, making an annualized rate of about 153 permits for 2006, far fewer (a 28 percent drop) than the 212 issued in 2005. Usually, fewer new houses being built means a slow economy. The two most recent slow building years were 2002 and 2003, when the market here was quite slow, if not altogether stagnant. However, on Nantucket, fewer new building permits being issued might just mean fewer and fewer vacant lots on which to build.

According to U. S. Census Bureau data, of the 15 largest cities surveyed, median home prices jumped quite a bit between 2000 and 2005.

In Los Angeles, median home prices rose 110 percent from $244,398 in 2000 to $513,800 in 2005. In New York, median home prices rose from $250,746 in 2000 to $449,000 in 2005, or about 79 percent. Of the smallest cities surveyed, Boynton Beach Florida saw a 120 percent increase in median home value from 2000 to 2005. Nantucket (not included in the survey) saw an increase of 88 percent in median home prices from $795,000 in 2000 to $1,495,000 in 2005. Not bad for a little sandbar out in the ocean where approximately 80 percent of the properties are owned by non-resident taxpayers who occupy their homes here a small portion of the year.

2006 is left off the survey, but in August, according to the National Association of Realtors, nationwide median sales prices of existing homes actually fell for the first time in eleven years. Inventories of unsold homes also rose to a thirteen-year high. It was the first time since April 1995 that median prices had fallen on a year-over-year basis. It was the second-largest decline in the 38-year history of the Realtors survey, exceeded only by a 2.1 percent drop in November 1990. Here on Nantucket, 1990 and 1991 saw some of the largest declines as well, as much as 35 percent in some cases.

Sure, rising property values are good in theory. But to realize these gains in your 'paper wealth' you have to sell your property. But everyone else's property values have gone up as well. So your new money does not buy as much and perhaps you are forced to settle for a condo or forced to look to the mainland for a place to live. . . . It's ok, sea levels

are rising too! I

- A student of the current real estate market, and a licensed real estate salesperson since 1987, Rob has been performing real estate appraisals with Denby Real Estate, Inc. since 1996, as a field appraiser, market statistician, REALTOR, and most recently as Senior Vice President of Research, Data Collection and Dissemination.