Stability the rule
in island's real estate market
BY MARY LANCASTER INDEPENDENT WRITER
While most people view this point on the calendar as approaching the mid-year mark, those in the island real estate industry see it as just passing the first quarter, months before sales activity reaches its peak and provides a true indication of how the market is faring.

Although property inventory is up and sales have not experienced a flurry thus far, the number of transactions has been on the rise since January. The increasing volume gives hope to realtors who anticipate that while 2007 may not break records from prior boom years, market conditions at the close of the year will remain positive.

It is just too soon to tell how 2007 will shake out, say the experts, including Rob Ranney, who is senior vice-president of research, data collection and dissemination for Denby Real Estate. Denby, while still in the sales business, has changed its primary focus to appraisals, consultations, referrals and analyses. Ranney recently wrote that annual comparisons are difficult to make because of variables that include the whims and needs of individual consumers.

What will be most telling is the number of sales agreements secured through the summer and fall, how long properties have remained on the market unsold at that point and whether the island market stays stable due to very few foreclosures, despite high property prices that in turn require sizeable mortgages.

The current comparisons that can be made are these: as of May, 412 houses are actively for sale, along with 79 pieces of land. In June 2006, there were 389 houses on the market and 56 vacant land parcels. Penny Dey, a partner in AtlanticEast, who along with Ranney keeps a comprehensive data file, said what is significant to her is that in the first four months of this year sales of homes costing $4 million or above are on a track to exceed all sales in that price range last year. The homes selling for $2 million and below are selling at about the same pace as in 2006. Properties in the $2 million to $4 million range - 110 houses, representing about one-quarter of total listings - are moving slowly, likely due to the inventory in that category.

"My belief is that nobody has to buy on Nantucket. It is a second home market," said Dey, who has been in the real estate business for 22 years. "What has declined is the number of transactions this year, but the dollars are holding about the same. I think increasingly, sellers are being more realistic in their listings. They have to be if they want to sell."

Other statistics Dey provided show that the average selling price for the first quarter of 2007 is 92 percent of the listing price, indicating a more realistic pricing compared to last year when the selling price was 91 percent of the listing price for the entire year. Historically, Dey's records indicate that after the market downturn that followed the Sept. 11, 2001 terrorist attacks in New York, there were 522 total sales on Nantucket in 2002. In 2003 sales rose to 613; in 2004 to 776; in 2005 there was a dip to 659 because prices became significantly inflated, stretching into 2006 when sales dropped to 475.

"The last time the market had this kind of inventory was 2000 - 2001, before 9/11. I wouldn't call this an off-year judging by what has happened between January and April, because the last quarters of the year have a lot more business," said Dey.

She and Ken Beaugrand, a realtor at Nantucket Real Estate who has been in the business 12 years, essentially agree on all the points relating to the island's market so far this year and how the future months may go.

"While the number of transactions is down, volume is up slightly. From my point of view that's a really good sign," said Beaugrand. "The current trend shows activity is up. We're not going to have a gold rush anytime soon, but values haven't really dropped because most people don't have to sell. The inventory now would be an issue if people had to sell, but because they don't, this, instead, is seen as giving consumers more choices. I'm much more hopeful now than I was in the last year.

"Since we are a seasonal market we need to wait until the end of the season to see if inventory is dragging and, if so, the market has slowed more than I think it has," he continued. "Nantucket has always been a discretionary purchase, so buying has more to do with how people feel about the community rather than with price. Real estate is cyclical. It goes up a while, rests and may come down, but historically we've been steady since the early to mid-'90s. This is the first time in my memory that real estate hasn't moved in lockstep with the stock market, so maybe this is the time real estate starts to catch up."

Both Dey and Beaugrand talked about the fact that Nantucket's mortgages rarely undergo foreclosure, a trend that is increasing on the mainland but has not struck here. Beth Ann Meehan, a senior loan officer at Pacific National Bank, has an explanation for the situation, as well as some consumer advice.

"Predatory lending hasn't hit Nantucket as it has in other areas where people need a sub-prime loan - usually people with bad credit," said Meehan. "That is lending to people with loans that start with an attractive rate that rises during the life of the loan. The lenders on Nantucket do a good job to ensure people aren't getting in over their heads and can maintain payments in the long haul.

"Sometimes, people's life circumstances change, but [here] there are sympathetic lenders willing to work out an arrangement to save the loan and save the house until those people get back on their feet," she explained. "The thing that is still saving Nantucket right now is that our appraisals are not coming back showing we are in a declining market. Our appraisals are still coming back showing this is a stable market. We are at a good point right now."

Meehan advises those who anticipate problems with mortgage payments to sit down with their lender, explain their situation and work together to find a solution before a default pattern develops.

"Knowledge is power," she said. I