Real estate; a crazy new normal solidifies
Dispatches from the frontlines of the upscale
Every three months I circle back around real estate movement, track down insights, create vignettes, use the best stats I can find as dabs of paint, lay them side by side like a pointillist picture.
Then hopefully step back, see the landscape, and maybe say something meaningful.
Here we go:
Average sales price on Cape Cod
2019: $558,000
2020: $661,000
2021: $799,000
2022: $843,000 (year to date)
Note: In the previous two years, average sales price rose 18 percent a year. So far this year there’s been an 8-percent increase, some blunting off the crazy spike though at any other time an 8-percent hike in less than 6 months would be considered off the charts. Besides, if this pace keeps up for the full year the rise will be almost as dramatic as the previous two.
Even so, Realtors echo Sarah Pechukas in Wellfleet; “The total insanity of last summer has ebbed. Yes, we’re still getting multiple offers for anything that comes on the market, but more like two or three rather than 10. And yes, they’re still often over asking price. But buyers are showing fatigue, they won’t participate at that panicked level, so that’s the beginning of a market change.”
Active listings:
Most recent: 598
One year ago: 1250
Historical, “normal” amount: 2500
Note: Though listings remain historically low, they are higher than a few months ago, one reason for a tempering of the rush to buy.
To put the change in perspective, says Laura Clements, president of the Cape Cod and Islands Association of Realtors, “Instead of offers coming within a few hours, it’s taking a few days.”
The hot market has also encouraged a new tactic known as “coming soon” listings, properties not yet on the market but about to be. Buyers get a preview, sellers pack their initial open houses. Steve Flynn from Harwich is one broker who took quick advantage of this strategy: “I thought it was phenomenal,” he says. “Lots of early eyeballs.”
Number of homes on Cape Cod selling for less than $1 million:
2020: Almost 1000
2021: Less than 300
2022: Less than 100 (year to date)
Note: According to a housing official on Nantucket, the median price for a home sold on the island has reached — drumroll please — $3.5 million.
In the old days, people would sell in upscale places like Stamford Connecticut, buy a fine home for less money on Cape, and sock away the difference. It was like the wealthy suburbs were First World, the Cape Third World.
Now the Cape has taken the First World role; there’s a strong current of people selling here and heading to North Carolina, South Carolina, Arizona, Florida, Maine, buying great properties and banking a reserve.
Not that the traditional relationship is gone. “We used to say that the millionaires went to Nantucket,” laughs Flynn. “But now they’re getting kicked out by the billionaires. So the millionaires are coming to the mainland where everything looks like a bargain.”
Cash sales:
Before COVID: Approximately 25 percent of total
Since COVID: 33-40 percent
Note: Rising interest rates do not impact cash sellers.
If people are paying a million-plus for a home without needing to borrow a dime, do they really care if gas is $5 a gallon? Do they care that a restaurant meal is more like $35 than $20 (if there are people around to take the order and make the food)?
Still, this means that more than 60 percent of buyers ink a mortgage. Ryan Castle, CEO of the Cape and Island Association, says that many are disconnected from the Cape’s economy:
“Year-round workers are no longer constrained to occupations here. More and more of them are working remotely, choosing to be here because they can. That’s never been the case before,” and once again drives demand.
New construction on Cape Cod:
Less than 500 single family units per year
Necessary for a one-percent annual growth in housing stock: 1000 units
Note: We do not have enough land to “build our way” out of the affordable housing crisis, and besides, market rate construction skews high-end/high-return.
The law of supply and demand takes hold: In Orleans, on Snow Way, a spec home on just over one acre, no water view, 4600 square feet, four bedrooms, five full and two half baths, substantial amenities, is on the market for – drumroll please -- $3.5 million, Nantucket’s median.
Typical “low-end” rents (if you can find one):
Three-bedroom house: $2800 a month plus utilities
One-bedroom cottage or apartment: $1400-$1500 plus
Studio: $1250
Rooms (shared facilities): $1000
Note: Once upon a time people figured to spend 25 percent of income on housing. That shifted to 30-40 percent a few years ago. Now it’s 50 percent; that leaves no margin for emergencies let alone savings.
“Working people are getting screwed,” says Ronnie Bourgeois, who handles major volume in lower income rentals. “Recently I’ve seen a young journalist making $3500 a month, an airline employee making $3000 a month, great jobs at starting wages no one should be ashamed of, contributing members of society, and they can’t find places to live.”
With rents at that level, why not call it a mortgage and buy? Answer: Nothing for sale. Even if there were, few working people could qualify for the necessary mortgage based on formulas lenders use -- though these same people still manage to pay comparable rentals every month (when they can find one).
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So where do the points all point toward?
The market is beginning to level off. But the upscaling that has happened will not reverse or vanish. Gas prices, inflation, interest rates, none will force major adjustments. What goes up must not come down.
Going forward it won’t be “an insane seller’s market,” as Steve Flynn describes the last two years, but a seller’s market it will remain, and for a good while.
(Stats from Multiple Listing Service, the Cape Cod and Islands Association of Realtors, broker analysis and anecdotes.)
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I appreciate your work Seth, but building is necessary step to addressing the affordable housing crisis. Allowing for concentrated, and dense development, in areas that have already been built up will help ensure the Cape remains a place for all and not just the privileged few.
Great informative article