Editorial : Nothing to frolic about, but...
The real estate economy here is in the dumps, and prospects for its revival in the next few months are dim. That's especially unfortunate, because real estate values are the basic building blocks of financial life in the six Island towns. These values, recently in decline, underpin the decisions made several times a year by voters at annual and special town meetings on spending questions concerning education, law enforcement, and environmental, social, and municipal services. Anticipating or already experiencing declines in anticipated revenues based upon declines in real estate assessed values, town budget builders are nipping and tucking everywhere they can. How much a town's real estate is worth is also one measure of its borrowing ability, and that means whether a new school, police station, or town hall, or even repairs and remodeling can be financed.
Real estate values are also at the heart of home ownership, the Island's largest industry. Real estate values form the starting point for a whirlwind of expenditures which are the mainstays of the Island economy. Real estate brokers, lawyers, Island banks, plumbers, carpenters, electricians, architects, landscapers, and excavators all participate in the whirl of buying and selling and maintaining which has real estate values at its core.
The non-real estate business life of the community also depends to a large degree on real estate. Small business owners use credit lines and equity lines, most of them collateralized by private real estate holdings, in the case of the smallest businesses, or commercial real estate, in the case of the largest. Banks lend the money to remodel stores, to buy inventory in the winter that will not be sold till spring, to cushion part of the business year in which cash flows are inadequate, and for a host of expansions and upgrades crucial to growing, prosperous businesses. Growing, prosperous businesses employ increasingly well paid workers and add more to the payroll as business improves. But as real estate values fall, and the real estate sales industry falters, the micro-economies of employees, of business owners, of real estate brokers, lawyers, bankers, plumbers, carpenters, electricians, architects, landscapers, excavators, and towns all contract.
Such an economic analysis, in times like these, can cause anxiety, but there is some comforting information that, on a relative basis, creates an opportunity for hope. For instance, in the 23 months ended at the end of November a year ago, there were a few more than 22,000 foreclosures of residential property in Massachusetts, or about 116 failed mortgages per 10,000 residences in the Commonwealth, according to the Warren Group, as reported in Commonwealth Magazine. In poorer areas, the news is worse: Lawrence, 616; Fitchburg, 376; Brockton, 467; Dorchester, 945. In wealthier areas, measured by real estate value, it's better, and much better in some Vineyard parts: Chilmark and Aquinnah, fewer than 25; West Chop/Tashmoo, the same; the ritzier parts of Edgartown, ditto. Nowhere on the Vineyard is the rate higher than between 25 and 100 per 10,000. Foreclosure rates above the state average were found in 80 of the state's 351 cities and towns and, according to Commonwealth Magazine writer Robert David Sullivan, all 80 had average housing values below the state average of $404,000, which is well below the Vineyard average, closer to $700,000.
The lesson to be drawn from all this is that the Vineyard is fortunate to have an economy that is built upon a sturdy reserve of real estate value, in large part driven by property owners who are not year-round residents. That reserve will help support the Island economy through this difficult and unpredictable global economic downturn, but it is hardly immune to national and even global trends and demands clear-eyed and active nurturing by political, regulatory, and environmental leaders.