The reality of the Martha's Vineyard real estate market
Galileo's Famous Falling Object Experiment applies even to real estate - what goes up, must come down. Every good run of appreciation is inevitably followed by a period of declining sales and values. The Martha's Vineyard real estate market has run in 10-year cycles since I entered the industry nearly 40 years ago.
Statistical data for the past 20 years clearly illustrates what has happened in the Martha's Vineyard market in that time period. The graphs included here are an aid to understanding the trends.
In March 2002, The Martha's Vineyard Times published "A Year by Year Review of the Real Estate Industry on Martha's Vineyard" from 1989 through 2001.
The Martha's Vineyard Times graphs showed the decline in values and sales from the late 1980s to the early 1990s, coinciding with the downturn in the economy at that time. They also showed the trend of the recovery that occurred from 1991 to 2001.
We have continued charting the real estate trends from 2001 to 2008 and the results are truly enlightening.
In the 1990s, the growth in dollar value and the number of transactions closely paralleled one another. Our Island economy, and our real estate values, followed the general growth in the national economy. Additionally, Martha's Vineyard gained international recognition when former President Clinton chose Martha's Vineyard as a summer retreat. The media attention brought us many new summer visitors and consequently a whole new pool of real estate buyers. We had a decade of continuous growth in sales and values from 1991 to 1998.
Popular opinion is that the real estate market continued to grow for yet another decade (1998 to 2008), but upon review of the actual numbers of sales, it's evident that the first decline began in 1999, when sales dropped from the all-time high of 1,000 in 1998 to 895 in 1999. And those numbers kept going down - as of November 30, there have been only 299 sales in 2008.
However, the perception of growth continued because the dollar volume continued to climb until 2005 - imagine, fewer sales, more dollars.
Many property owners feel that the market decline began this year. In fact, the decline began in 2006. The highest dollar volume in sales was reached in 2005 and there has been a 55-percent decline since then. Note that this decline began long before the stock market began to tumble.
As wealth was accumulated in our economy, demand was created, and prices were driven up. And this wealth changed the face of Martha's Vineyard in many ways, but most evident to me was the loss of many potential buyers who were priced out of the market. An important segment of these lost buyers are the year-round residents of Martha's Vineyard. The enormous growth in the cost of even the smallest parcel of land or the most modest house removed forever the opportunity for many Islanders to purchase their own home.
A second result was the loss of jobs. As is most often the case, when a real estate market booms or busts, so too goes the number of real estate agents. In the 1980s, there were approximately 30 offices on Martha's Vineyard. Today there are more than 80. There has already been some attrition, and there will undoubtedly be more in the months to come.
While it is impossible to accurately predict what lies ahead, knowing the trends of the past two real estate cycles does provide a legitimate basis for making decisions on how to move forward.
Any property owner interested in selling within the first few years of the next 10-year cycle needs to be apprised of historical trends to understand that a dramatic shift has occurred in the Martha's Vineyard real estate market. We strongly urge all potential sellers to understand current market conditions and the changing values and to consult a professional, experienced realtor about how to best position themselves to accomplish their goals.
At the same time, a prospective buyer should be examining the same historical trends and understanding that they have been provided with a window of opportunity to invest on Martha's Vineyard. There are several conditions favoring the buyer:
- There is more inventory available now than at any time since the market downturn in the late 1980s.
- Price reductions/corrections are occurring with regular frequency.
- Interest rates are lower than they have been in the past 40 years, and financing is readily available to qualified buyers.
An incredible opportunity presents itself to all those who have been waiting on the sidelines for the past decade, wishing they had gotten into the market in the early 1990s!
Sharon Purdy is the owner of Sandpiper Realty Inc. and Sandpiper Rentals Inc. in Edgartown. She has been a licensed and practicing agent since the early 1970s and has survived and thrived through several market downturns.