Greetings and a happy belated New Year to one and all! As has become customary, we offer our annual installment of “The Year in Review” concerning Martha’s Vineyard Real Estate activities.
It appears that 2015 was the watershed year for the real estate recovery to finally take hold on-Island. It has been a long many years of meandering since the depths of the real estate recession in 2009 for Martha’s Vineyard real estate. The confluence of events, specifically positive sentiment, heightened levels of quality, well-priced inventory and attractive financing options combined toward making 2015 a very strong year for sales, and have continued to carry forward into 2016 and 2017 respectively.
Despite the fairly pedestrian “spring market” and seasonal weather to start last season, Mother Nature did provide us with another terrific summer for all concerned. Let’s hope for another mild weather pattern in early 2018 to help parlay the robust real estate activities of fall into the New Year!
The significant cadre of prospective buyers who have been biding their time since the market height in 2006, then endured the “great recession” and subsequent market recovery, have become more aware of the nuances associated with Island ownership. Many parties re-entered the market during the past three seasons to make their purchases, which has effectively contributed to an inventory supply issue on-island that reflects what is being experienced in many primary markets. With higher lending rates now expected, and demand beginning to outpace supply, we anticipate the New Year getting off to an early and strong start before the customary “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.
- 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.
- The recent tax law has modified the mortgage interest deduction for primary loans, reducing the eligible amount from $1M to $750,000. While not viewed as a significant variable for many second-home buyers, it is an aspect worth discussing with your financial counsel during the consideration of purchasing an Island home.
- Freddie & Fannie Loan limits have been increased specifically for the Cape Cod & Islands region. The ‘mezzanine’ level found above the conventional limit of $417,000 now extends to $679,650 before Jumbo portfolio product is required for lending need.
- 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 continued policy tact from the Federal Reserve Bank.
- The S&P, Core-Logic, and Case Shiller Indices report that U.S. homes prices increased nearly 7% in 2017 and expect them to increase comparably in 2018, the result of existing tight inventory conditions. Therefore, the sentiment stemming from this primary market dynamic will likely affect Island real estate pricing too as local inventory contracts.
- The 4th Quarter realized a significant volume of residential sales on-Island (137) exceeding Q1 (97), Q2 (120) and Q3 (109). Interestingly, 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 566 in late August to 415 at this writing. Arguably, the Vineyard market still has excess inventory. With 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 2017, residential sales on-Island were realized from all price segments totaling 464 units versus the 456 transacted in 2016. Median and average sales prices both increased year-over-year, whereby the former increased by 8.7% from $723,000 to $785,000 and the later increased 10.6% from $1,149,000 to $1,271,000.
- Sales prices on-Island continue to capture approximately 95% of their asking price, and have on average garnered 124.4% of their respective tax assessment.
- For the year, Island towns conveyed the following number of single family homes; Edgartown-143, Oak Bluffs-101, Vineyard Haven-95, West Tisbury-52, Chilmark-38, and Aquinnah-9.
- 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. 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 2017 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 2018, that Martha’s Vineyard will fully 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 further 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 2018 summer vacation rental. Our inventory continues to grow featuring homes that accommodate most every need and represent every corner of the Island. But availability for best properties and weeks are waning. Please contact us to assist you in creating your dream vacation!