Real estate realities

OK, summer rentals are soft, but here's what really matters: The free market is destroying communities

With July 4^th rockets’ red glare in the rear view, real estate pyrotechnics continue to explode across the peninsula.

The latest bursts highlight two things:

1)  Summer rentals are way down. Possible reasons:

• The cost for a week in a cottage in the pines has gotten so high that people would rather travel in luxury across Europe for the same dough (and no longer need a COVID test).

• Or, like Yoga Berra said, “No one goes there anymore, it’s too crowded.”

• Or even, sharks.

These possibilities probably embrace “and/or” rather than “or.”

2)  Much more important, there is no sign working people without trust funds or a winning Megabucks ticket can break into the market.

• As stats below detail (I know many enjoy combing through these numbers), the run-up in prices that COVID accelerated seems here to stay. There are changes from 2022 to 2023 — slightly fewer sales and pending sales, a few days longer average time from listing to closing — but no seismic shifts and the median price for a single-family home on Cape Cod maintains at $700,000.

Did I mention interest rates? Tacking on two or three percent means that even those who did the “right” thing, scrimping, building a nest egg for a down payment, got screwed again, unable to make monthly mortgages let alone convince a bank they quality to try.

Cash buyers don’t care about little matters like cash flow, or housing costs as a percentage of living expenses. They continue to warp the market, disconnect value from what the local economy can create for income — then often Air B&B their “investments” so don’t even help with adding stock to address a year-round rental crisis.

Dispatches from the front lines personalize all this:

A small house not long ago listed at $250,000 or $300,000 is showing up at $600,000, says Realtor Steve Flynn. That’s today’s version of a “starter” house.

“There was an open house in Brewster, listing at around $500,000-$600,000, and something like 200 people showed up,” he says. “It felt like being in a crowded bar. There were 20 offers, right away.

“I had a seller list a property at $1.2 million – which doesn’t even get you on the water anymore. They got an immediate offer at $1.2, and wouldn’t accept! They countered with a number above their own asking price, like $1.7. That to me is really disingenuous.”

Laura Clements, named Realtor of the Year by the Cape and Islands Association of Realtors for her combination of business success and community engagement, says a recent study from the Housing Assistance Corporation concluded people need an annual income of $200,000 to qualify for a Cape Cod “starter” home.

“That calculation was done with lower interest rates,” she adds. “It’s worse now. Meanwhile, it always was the case that first-time homebuyers figured they would be able to work their way up the market over time. But at that price, I have no confidence saying, ‘Hey, you’ll have equity in five or six years for a bigger house.’ I just can’t say it.”

Realtor Gabby Hanna, who understands the Outer Cape and Provincetown’s unique niche as well as anyone, says that the condominium market at the tip is comparable to the low-end single family scene elsewhere, meaning $500,000 to $700,000, and moving.

“One thing I’m saying is I wouldn’t recommend anybody pay big money for a basement unit because it won’t increase in value anytime soon. Six years ago I said differently,” she reports — and she was right. “So unless interest rates double, or a major storm impacts us which seems more possible all the time, a year from now we’ll be where we are right now. What you see is what you get.”

No real estate rundown is complete without checking on Ronnie Bourgeois, the strongest player in the year-round “low-end” rental market on the Cape. Ronnie owns 180 units, rents or manages many more.

“I’m killing it,” he says with a mix of satisfaction and rue. “It’s a good time to be a landlord. But it’s impossible to be a working family here.”

He just rented a three-bedroom, two-bath, two-car garage home in the mid-Cape for $3600 a month year-round plus utilities, “my biggest rent ever.” A four-bedroom apartment in a Hyannis duplex development that for years had a bad reputation went for $2900.

He hopes accessible dwelling units, approved in most towns, plus government and non-profit initiatives for “affordable” housing, finally will create more supply. But most of that will be rentals, not the “American dream” homeowner scenario.

Given tough zoning, town boards that create major obstacles to build or rehab at density, costs for materials and labor driving ever higher, he’s far from optimistic.

“I see no loosening,” he concludes. “It’s only getting worse.”

Single-family homes, Cape Cod, May plus calendar year through May, 2023-2022

Sales completed:

• 5/23: 249

• 5/22: 300

• YTD 2023: 1005

• YTD 2022: 1218

• % change YTD: -17.5%

Median price:

• 5/23: $700,000

• 5/22: $749,000

• YTD 2023: $699,000

• YTD 2022: $690,000

• % change YTD: +1.3%

Pending sales:

• 5/23: 278

• 5/22: 339

• YTD 2023: 1128

• YTD 2022: 1336

• % change YTD: -15.6%

New listings:

• 5/23: 353

• 5/22: 475

• YTD 2023: 1284

• YTD 2022: 1615

• % change YTD: -20.5%

Amount of existing inventory:

• 5/23: 459

• 5/22: 462

• % change: -0.6%

Days on the market until sale:

• 5/23: 29

• 5/22: 28

• YTD 2023: 46

• YTD 2022: 35

• % change YTD: +31.4%

(Source; Cape and Islands Multiple Listing Service)

Haven’t subscribed yet? With all due respect, why not? Please keep seeing a Voice (a cool trick), and support this local expression:

https://sethrolbein.substack.com/welcome