Editorial : A good first half in real estate
Martha's Vineyard real estate industry figures for the first half of this year show a welcome increase of activity and some improvement in prices for completed transactions. The changes are more substantial than upticks for similar periods in the past three years, but the perilous nature of the global, national, and regional economies suggests that a cautious outlook seems prudent.
The total number of all sales concluded in the first half of 2012 rose 28 percent to 231. Residential and commercial property participated in the upswing. Sales of undeveloped land lagged sharply. This number includes all sales in all towns. The value of the completed deals jumped 25 percent to $209 million.
On the other side of the coin, the improvement did not pare the inventory of properties for sale, which remains nearly three times its normal volume in the pre-Great Recession years. And, it is reasonable to assume, though tallying this share of the market is difficult, that some substantial portion, maybe between five and 15 percent of the transactions, was the result of distressed sellers giving up — short sales, foreclosures, seizures, and sales concluded with foreclosure imminent.
Real estate values are at the heart of home ownership, stimulating the Island's largest industry. Economically, real estate matters to Islanders, not only to those who are buyers, sellers, or brokers. An uptick of the order reported for the first six months of 2012 implies good economic news ahead.
Typically, a little more than $500 million of Vineyard real estate changes hands in arm's length transactions each year, much less in the last three years. These deals mark the starting point for a nexus of expenditures that contributes hugely to the Island economy. Real estate brokers, lawyers, Island banks, builders, plumbers, carpenters, electricians, architects, landscapers, excavators, and more participate in the whirl of buying and selling that has real estate value at its core.
Improving real estate activity, assuming improving values, means that town tax bases grow, so that unless voters spend, spend, spend, tax rates decline, and consequently tax bills do the same. Property values underlie town borrowing ability, and that can influence whether a new school, police station, or town hall may be financed. Low borrowing costs and improving property values will help Vineyard towns to make municipal improvements.
Real estate values are more art than science. Just consider the $92 million asking price for the Homer's Pond property, as reported last week. It's a matter of what smitten buyers will pay for their dream property. Buyers in the first half of 2012 paid more for their dreams than they did in the comparable period a year ago. The median value of a sale rose 10 percent to $563,000, and the average value jumped three percent to $933,000. Sales in the first half of the year concluded at about 93 percent of the seller's asking price and about 94 percent of the assessed value. These last numbers suggest continued pressure on assessors and consequently on the value of town real estate, on which taxes are based.
Given the central part the real estate industry plays in the Vineyard economy, even modestly encouraging numbers, such as those turned in for the first half of the year, are cheery.