Editorial : How far we've come – not so far
The news this morning suggests that the real estate market on the Vineyard may be perking up a bit. There are signs that foreclosures may have reached their peak here, and there is optimistic talk of money on the sidelines, pent-up demand, and realistic pricing — all ingredients needed for an upswing. There is reason to think this optimism may be justified, but there's reason to be cautious too.
That's because variations in the rate of decline evidenced in the data says nothing conclusive about what happens next. The number of houses sold in 2011, the median price, and the value of those houses all fell substantially in 2011, from 2010 levels, according to a report by Times writer Steve Myrick. These numbers have been falling annually, though at varying rates since the Great Recession began. The average price of a house fell from $1,054,000 to $939,000 in 2011, a decrease of 10.9 percent. Since the latest Island real estate boom in 2007, the average price of a house has fallen 34 percent.
The total value of houses sold in 2011 fell 19 percent, from $370 million in 2010 to $300 million. Ten years ago, in 2001, the total value for the year was $514 million. We were living the dream in 2001.
The 1990-1991 recession had knocked the stuffing out of the industry, and annual sales totaled barely more than $100 million for each of those economically troubled years. For a full decade, industry growth lagged, though progress was steady. By 2001, the industry was booming again. In 2001, there were nearly 600 completed transactions, whose average value was about $900,000. There was reason to believe, based upon the annual improvements in sales and averages during those post-recession years, that 2002 would continue the trend.
Alas, in 2002 we discovered that the pace could not be sustained. Total sales volume continued high, but average value dropped to $633,000, and total sales added up to $371 million. The real estate industry on Martha's Vineyard begins 2012 as if it were 2002.
Neither the current data nor the history of real estate sales since the millennium are comforting, but they are instructive. The importance of the contribution made by the real estate industry — influencing as it does banking, insurance, construction, and retail sectors — cannot be overstated. It is key to the health of the Vineyard economy, and the slough in which we find ourselves today owes a great deal to the decline in real estate activity. It contributes to the shortage of jobs, the inability of many Vineyarders to pay their bills, to buy or rent shelter — even heavily subsidized shelter. And, it shrinks Island wealth, lowers property values, raises town property taxes, and reduces available disposable income, thereby harming small businesses of all sorts, including retailers.
Our economy benefits from several important revenue streams, including transfer payments (Social Security, investment income, pensions), seasonal economic growth when we import dollars from visitors, long- and short-term, who don't live here year-round, and money associated with the real estate industry. We can't live comfortably without any one of these.