LANDMARKS REAL ESTATE
2016 Year-end Market Commentary
By Sean D. Federowicz, M.B.A.
Broker, Owner, Realtor
The significant cadre of prospective buyers who had been biding their time since the market height in 2006, having endured the “great recession” and the subsequent market recovery of 2015 on-Island, have become more aware of the nuances associated with Island ownership. Many of these parties re-entered the market during the past two seasons to make their purchases. Yet seemingly, there is a balance of prospective buyers who are still on the sidelines, waiting for the “perfect property” or “perfect time” to commit.
The irony here is that these very same folks may risk missing out (again) on an attractive buying opportunity as the Vineyard market continues to demonstrate improved strength. With higher lending rates now expected, and if the weather cooperates, we anticipate the New Year getting off to an early and strong start before the customary, albeit competitive “spring market” arrives. Here are some facts, observations, and opinions that may help you formulate your own point of view regarding the state of Martha’s Vineyard real estate.
Here are some facts, observations, and opinions that may help you formulate your own point of view regarding the state of Martha’s Vineyard real estate.
- Nationwide sentiment toward real estate has substantively improved, especially among second home seekers in vacation/destination markets like Martha’s Vineyard, as investments made within these segments are for both lifestyle and financial purposes.
- Reinforcing the good feeling is the continued and relatively favorable interest rate climate. However, the near-term trajectory of lending rates appears to be heading upward with the recent policy actions from the Federal Reserve Bank.
- The S&P, Core-Logic, Case Shiller Indices expect home prices to improve another 5.2% in 2017, likely as a result of existing tight inventory conditions. But the sentiment stemming from this primary market dynamic will likely affect Island real estate pricing too, even if nominally.
- The 4th Quarter realized a significant volume of residential sales on-Island (155) exceeding Q1 (88), Q2 (99) and Q3 (114). Our “Fall Market” has become stronger than the customary “Spring Market”. Note that the total number of properties for sale has decreased significantly from the seasonal high of approximately 637 in late August to 475 at this writing. Arguably, the Vineyard market still has excess inventory. But with the supply of “quality” units falling, prices can more readily increase. This could also be a cue for potential sellers to enter the market with new listings come spring, if not sooner. Please contact us to discuss the salability of your property.
- In 2016, residential sales on-Island were again realized from all price segments totaling 456 units versus the 462 transacted in 2015. However, comparative to 2015, the high-end segment participated to a lesser extent this year. As a result, price divergence has now developed between median and average sales prices, whereby the former increased by 11.2% from $650,000 to $723,000 but the later decreased 8.7% from $1,259,000 to $1,149,000.
- Sales prices on-Island continue to capture approximately 95% of their asking price, but garnered 129.40% of their respective tax assessment. This break in correlation between assessed value and sales price has continued from the end of 2012 and confirms that a return to “normalcy” is well underway on Martha’s Vineyard.
- For the year, Island towns conveyed the following number of residential properties; Edgartown-141, Oak Bluffs-118, Vineyard Haven-95, West Tisbury-55, Chilmark-39, and Aquinnah-8.
- The Island is a finite commodity having both geographic and economic barriers of entry that promote various price supports not typically found in many primary real estate markets. Although scarcity, location, condition and amenities continue to be key drivers toward pricing.
- As desirable inventory is pared down, prices will continue to adjust upward as a function of supply and demand. It is not surprising that with the improved market climate, the better priced, better conditioned properties are going under contract more quickly than their respective competition.
- Our successful 2016 clients, buyers and sellers alike, have these best practices in common: Identify your wants and needs, learn the market, develop reasonable expectations, perform your due diligence, and “be prepared to act”. This micro-market has returned to a more competitive and urgent dynamic.
It is our expectation for 2017, that Martha’s Vineyard will catch up to the competitive trends found within many primary markets. We expect the increase in search activity to continue, especially from those who have long watched from the sidelines and may now fear “missing out” on capturing their dream of Island ownership or having to endure higher finance costs to do so.
As the economy continues to stabilize, the absorption rate for Island property will also continue to increase, resulting in sales price increases as supply decreases. Lastly, with mortgage interest rates now rising, this factor may also provide some incentive for prospective buyers to act sooner rather than later. This will add to the increased competitive dynamic for real estate acquisition on-Island.
Certainly anything can happen during the year, of course, and the Island’s resilience as a discretionary market of desire will be tested. However, for those individuals who perform their due diligence, work with an experienced Realtor, and are ready to take action, it still remains a great time to be a Buyer of Martha’s Vineyard real estate!
If a purchase of an Island property is not in your future right now, there is still time to book your 2017 summer vacation rental. Our inventory features homes that accommodate most every need and represent every corner of the Island. But availability for best properties and weeks is waning.
As always, do not hesitate to contact us with your questions concerning properties of interest, and Martha’s Vineyard real estate concerns in general.