about nantucket

Second Quarter 2015

 

Nantucket is a town, a county, and an island destination resort located 26 miles south of Cape Cod, 91 air miles south of Boston, and 207 air miles east of New York City, in the Commonwealth of Massachusetts off the east coast of the United States. Some 14 miles long and 3 1/2 miles wide, the island has a perimeter of 55 miles of sandy beaches facing the Atlantic Ocean on the south and east and Nantucket Sound on the north and west. Though losing about six acres per year from shoreline erosion, particularly along the southwesterly and easterly shorelines, the island's total area is just under 50 square miles, or roughly 30,000 acres. It has been predicted that a warming atmosphere and rising ocean levels, combining to accelerate erosion and increase ocean storm ferocity, may cause the island to disappear in less than 350 years.

 

Travel to and from the island is by boat from Hyannis, or airplane from Hyannis, New Bedford, Boston, or New York. Nantucket's Memorial Airport is second in New England in the number of flights, with an estimated total of 258,000 passengers departing in 2009, well below the 302,161 in the year 2000. In the year 2009, the Woods Hole, Martha’s Vineyard, and Nantucket Steamship Authority, created in the early 1960s as the island’s lifeline, transported some 513,600 passengers to and from America to Nantucket. 67,200 cars and 38,000 trucks were carried between Hyannis and Nantucket. These figures were off about 6.8% compared to 2008. After a slower start in 2010, traffic to the islands improved with warm summer weather and currently is close to last year’s levels. The privately operated Hy-Line, licensed by the Steamship Authority, carried some 360,000 passengers roundtrip from Hyannis in 2009.

 

During the "palmy days" from 1750 to 1850, Nantucket was the whaling capital of the world, with her locally-built sturdy whale ships and crews representing the first Americans traveling far into the Pacific Ocean in search of spermaceti. With their successful voyages, the island became the second richest community in New England. But after the discovery of petroleum in Pennsylvania, Nantucket’s Great Fire of 1846, the development of rail transportation to New Bedford, and the 1849 gold rush, Nantucket’s whale fishery declined rapidly. The islanders gradually encouraged the summer visitor and tourist trade, and along with construction of new homes, this is the leading industry today.

 

A real estate boom began in the mid-1960s and continued through 1989 before correcting severely during the savings and loan crisis, with the average home value dropping about 35% and the average vacant lot declining 50% over four years. The bottom was reached in 1992-93 and the market improved until 2000, a year that finished as the most successful in Nantucket‘s history, followed by 2003 and then came the blockbuster year of 2004, which broke through a billion dollars for the first time. In 2005 the billion dollar figure was again exceeded, though some $137 million represented commercial properties. 2006 represented a slower market with the general downturn in the mainland housing market, and the slower trend continued through 2008, with the national mortgage crisis and resulting global financial woes having a direct effect on Nantucket in 2009 through 2011. 2012 showed some renewed market energy, while 2013 showed some moderation. 2014 rebounded again, carrying into 2015.

 



[1] 2008 Town Report, Town of Nantucket, 16 Broad Street, Nantucket, MA 02554.

[2] “Monitoring the Nantucket Economy”, Nantucket Planning and Economic Development Commission and Nantucket Chamber of Commerce, by RKG Associates, Inc., June 2002, page 31

 

New construction had averaged over 200 houses per year providing a high level of income and steady year-round employment in the construction trades. In 2005 there were 212 permits issued, including 19 for the Sherburne Commons assisted-living project. In 2006 the annual rate was slower than in recent years, at 156. 127 permits were issued in 2007, the lowest construction rate since 1991. The slowdown continued in 2008, with an annual rate of 64, a decline of about 50% in new home construction from 2007, which in turn had already declined about 20% from 2006. The number of single-family permits issued in 2008 is the lowest figure since records have been kept dating back to 1972, when building permits were first required. 2009 supplanted 2008 for the lowest annual building permit number, the annualized rate was 44 permits, continuing the drastically slowing building trend. 2010 ended on a similarly slow note, with an annual permit rate of 53, just above the 2009 total. In 2011, there were 54 single-family permits issued, approximately on par with 2010, and continuing a dramatically slow period for new construction. 2012 ended slightly ahead of 2011, with 58 new single-family permits being issued, perhaps a sign of renewed confidence in the market. In 2013, 108 single-family building permits were issued, a rate nearly double that of recent years. 140 single-family permits were issued in 2014, an increase of 30% over 2013’s numbers. As of the end of May, there have been 52 single-family permits issued in 2015, an annualized rate (at the current pace) of 125.

 

Property taxes in Nantucket County continue to be the third lowest in Massachusetts. The assessed valuation for the entire island as of January 1, 1994, was $3.036 billion, rising to the figure, as of January 1, 2006, of $20.4 billion and then to $20.9 billion in fiscal year 2011. The mil rate for residential property was $2.76 for 2009, $3.01 for 2010, $3.58 for 2011, $3.62 for 2012 and $3.76 for 2014.

 

As shown in the chart below, the average price for a buildable lot peaked at $226,000 in 1989, then declined to $123,000 as of the end of 1993, down 50% in four years, with a monthly low that year of $109,000. In 2008 the market for vacant lots slowed drastically, with the average lot sale declining by 36% compared to 2007. 2009 continued this downward trend. In addition, due to relatively few vacant lot sales in 2011, but several being over $3 million, including a $12 million and an $8 million sale, the average lot sale in 2011 was skewed to near $2 million. 2012 ended on a positive note, while 2013 ended on a much more moderate note. 2014 ended much stronger than 2013.

 

The average dwelling sale price rose steeply after 1980, peaked in 1989 at $504,000, then declined about 35% into 1993. In 2006 the average home sold at $2,378,000 with a median of $1,550,000. Homes over $1 million constituted nearly three-quarters of the entire residential market through the height of the “boom years”. Typically, less than 1 - 2% of the home market is in the $225,000 to $500,000 “affordable” range. In 2002 home prices declined, but had been rising since July of 2003 and finished at a record average sale price of $2,438,000 in 2006. A slow down in 2007 had resulted in a decline in the rate of average home price increases for the first time since 2002. In 2008, the number of transactions was off 36% from 2007, and the dollar total was off 32%, but the average home sale of all homes sold still peaked at $2,561,000. The average and median home sale prices began a downward trend in 2009, seem to have formed a “bottom” through 2010 and 2011 and are showing renewed strength through the current time.

 

Due to the unique consideration that Nantucket properties are almost 89% owned by non-resident taxpayers, who may have affiliations or interests in Wall Street, we can see some correlation to the Dow Jones Industrial Average:

 

Different neighborhoods of the island have different price appreciation rates, as shown in this graph of average home sale price averages comparing selected areas to overall Island sales. These figures can change dramatically when several high or low-priced home sales occur in an area to alter the overall average figures. In Dionis, there were only two sales in 2008, with an average of $6.7 million.

 

 

Between 1988 and 1990 volume also declined, a factor stemming from the 1987 stock market crash, higher interest rates, the 1986 "Tax Reform Act" that had a disastrous effect on real estate values, and a general recession in the northeastern United States. Although foreclosures represented 7% of the market for 1992 and 2% in 1993, that is below the 11% seen in 1990 and 1991. Since 1994 the rate has been less than 1%. In 2008 we knew of perhaps less than 5 actual foreclosures, an increase over 2007, but still representing much less than 1% of the market. In 2009, there had been an estimated 25 – 30 foreclosures, representing approximately 6% of the market. Foreclosures remained steady throughout 2010, with an estimated 35 – 40 foreclosures representing approximately 7% of the market. 2011 saw an estimated 23 foreclosures, representing about 2% of the market based on dollar volume. In 2012 there were 35 foreclosures, representing approximately 3% of the market by dollar volume. 2013 ended with 12 foreclosures, representing approximately 1% of the market by dollar volume. Currently, as of the end of December 2014, foreclosures are representing approximately 1% of the market by dollar volume.

 

 

The volume of property sales has been generally strong since the 1990's:

 

 Year                                           Lots                            Homes                             Commercial

1993                                           235                                 319                                         7

1994                                           293                                 315                                         19

1995                                           236                                 325                                         9

1996                                           288                                 325                                         19

1997                                           232                                 349                                         15

1998                                           269                                 418                                         32

1999                                           201                                 388                                         32

2000                                           185                                 389                                         15

2001                                           137                                 240                                         14

2002                                           125                                 302                                         11

2003                                           148                                 361                                         16

2004                                           176                                 468                                         41

2005                                           117                                 398                                         22

2006                                             59                                 284                                         9

2007                                             46                                 301                                         5

2008                                             32                                 174                                         14

2009                                             35                                 164                                         5

2010                                             42                                 253                                        12

2011                                             43                                 260                                         9

2012                                             83                                 339                                         23

2013                                             89                                 312                                        17

2014                                             89                                 380                                        20 

2015 (thru May)                           27                                   89                                         12      

 

Average time on the market for all listings in 2009, was eleven months, while average sale price as a percent of listing price was estimated at 76%. In 2010, average time on the market dropped down slightly to 10 months, with homes selling on average at approximately 79% of their listing prices. In 2012, time on the market averaged 11 months, with homes selling at approximately 84% of their asking prices. As of the end of 2013, homes are selling at approximately 88% of their asking prices on average, with average time on the market hovering at approximately 10 months. As of the end of May 2015, homes are selling at approximately 91% of their asking prices, with average time on the market at approximately 8 months.

 

Contributing to values on the island is a strong interest in and community support for conservation of the remaining open lands. Since the early 1960s, groups such as the non-profit 1,800 member Nantucket Conservation Foundation (NCF), the Trustees of Reservations, and the Massachusetts Audubon Society, have collectively purchased or been gifted nearly 40% of the island. NCF owns some 8,450 acres (28% of the Island), the Trustees some 921 acres, and Audubon about 874 acres. In addition, the Nantucket Islands Land Bank was created by the state legislature in 1983 for the purpose of taxing each Nantucket County real estate transfer and using the funds to purchase land in the public interest. It is operated by a five-member publicly-elected commission. Commission records, which must be completed by buyers and sellers under penalty of perjury and a 2% tax paid prior to transferring title in the Registry, provide an accurate record of real estate transfers. A transfer cannot be recorded in the Registry of Deeds without prior Land Bank approval. According to IRS, the Land Bank tax represents, not a deductible sales tax but an increase in the cost of purchase. The Land Bank has acquired some 2,200 acres of land (6% of the Island), at a cost far exceeding $100 million. About $20 million was collected through this fee in each of 2004 and 2005 and about $15 million in 2013 and $20 million in 2014.

 

According to IRS, the Land Bank tax represents, not a deductible sales tax but an increase in the cost of purchase. The Land Bank has acquired some 2,200 acres of land (6% of the Island), at a cost far exceeding $100 million. About $20 million was collected through this fee in each of 2004 and 2005. Recently receipts have declined with the slower market.

 

Nantucket is a desirable destination resort, with unique historic ubiquity, contributing to Nantucket’s upscale market appeal.

 

For more on our favorite subject (Nantucket!), please contact one of us, and you are always welcome to explore our web site www.denby.com.

 

Robert F. Ranney      Kate Ranney Sayle

 

© 2015 Denby Real Estate, Inc

 

 

 

 

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