A long and puzzling trip


Whether 2013 real estate sales mark a continuing stabilization and perhaps an upswing in the market or an unwelcome retreat from what was a sort of breakout year in 2012 depends on December results. At the end of November, the total dollar value of qualifying transactions this year was about $160 million behind the 2012 year-end total. That’s a big deficit for one month’s transactions to make up. Typically, one month’s transactions total between 30 and 40. The total value for those deals of between $30 million and $45 million is not enough to push 2013 sales above those for 2012.

The market since the crash in 2007 has been up and down, strengthening one year, staggering the next, but overall, recovering. Brokers say that the combination of low mortgage rates, lower prices, and inflated inventories have aided the recovery. But, each of these contributing elements includes some contradictions. For instance, lower interest rates would be hugely desirable strengtheners for the market if lenders had not at the same time become as risk-averse as they have. Mortgage requirements, including down payments and credit scores, have stiffened as interest rates have remained historically low. But this paradox affects the mid- to low-end segments of the market, where the sales volume is high.

At the upper end — properties of more than $1 million, waterfront or waterview — all cash buyers figure in many transactions, as do high income buyers who have no trouble meeting credit requirements, so that segment has turned in steadily improving performances, but such sales are few. The paradox in this part of the Vineyard market is that prices have not softened the way they have lower down the food chain. Sales in this top of the market segment increased in number last year, and they are strong this year also.

As to inventory, the historically high number of properties that flooded the market just before and immediately after the crash has not been significantly reduced. Some sellers have dropped out of the market to await price recovery, and some have lost their properties to foreclosure. Many have kept their properties on the market and refused to mark them down, except trivially.

Looking at the dollar value of sales in December 2012, brokers suggest that some of what would have been 2013 sales took place at the end of last year, to avoid tax increases and the uncertainties surrounding the calamitous mess created by the Congress and the Administration.

Brokers report that summer has been busy with shoppers, and the inventory spiked in the spring. The appetite for Vineyard property survives the fiscal, debt, and monetary storms that have unhinged the national economy. The real estate market has not succumbed the way some highly stressed regions elsewhere in the country have, brokers say, nor has it rebounded as strongly as some areas have.

Despite what was an uptick in 2012, the pace of sales has declined this year about 10 percent, especially during the first six months. The value of closed transactions fell almost 20 percent. Median prices jumped more than 10 percent this year, to about $600,000, while the average fell about 10 percent to roughly $860,000. Fewer sales at $2 million-plus account for the lower average.

Consideration of these numbers requires some perspective. For instance, if the number of qualifying, recorded transactions for 2013 equals the number for 2012, about 500, it will be fewer than were recorded for 2002, when the total for the year was closer to 600. It will be way lower than the total for 1998 when the total was 1,000. Indeed, it will be lower than the number for any year since 1991. On the other hand, average value of a transaction will be about 20 percent higher than in 2002 and even higher still than in any year since 1989, except 2001, when the average was about $900,000.

The mirthless irony is that between 1998 and 2007, in good times and lean ones for the real estate industry, there were few years which tallied more sales at high dollar figures than has been the case in the worst of the six years since post-Great Recession. So, one might reasonably ask, are the industry and the Island economy that benefits enormously from real estate activity better off today, as we scrabble out of the economic swamps, than they were a decade ago?