For four decades I can vouch for, people have been worrying that the Cape Cod housing market is pricing out local working people. But now we’ve gone to another level, and this is no bubble. Everything suggests that we are in a new reality way up and out of sight.
Snapshot:
Single-family home median sales price, April 2020: $625,000
One year ago: $439,900
Percent change in one year: Up 42.1 percent
Know anyone on Cape Cod whose income has gone up 42.1 percent in the past year?
Snide talk aside, the question, of course, is why this new stratosphere? The answer has plenty to do with COVID, but it’s really COVID in combination with pre-existing conditions that have created a perfect real estate storm, permanently changing the landscape.
Those conditions we all know well:
Cape Cod is beautiful. Cape Cod is finite. Cape Cod real estate prices are driven not by our local economy, but by the success of people from elsewhere; doctors, lawyers, Wall Street and hedge fund managers. And if it’s time to retire, you’re selling a home in suburban Boston or Westchester County with little or no mortgage, so you’ve got capacity to pay a lot to live the dream.
And then COVID piled on.
Snapshot:
Total homes on the market, 4/20: 394
One year ago: 1539
Two years ago: 1973
Percent change in most recent year: Down 74.4 percent
Percent change over two years: Down 80 percent
“I don’t think people understand just how low the inventory is,” says Ryan Castle, CEO of the Cape and Islands Board of Realtors. The law of supply and demand kicks in, and Castle defines the demand as three buckets, each filling up faster during and after the pandemic:
1) People taking a look around, feeling fragile, reconsidering what’s important, and deciding to retire in their late 50s or early 60s rather than hanging on another decade: “They were coming anyway, but they’re coming early.”
2) Professionals in their mid-40s, probably with kids, who got out of Dodge (aka the suburbs of Boston and Manhattan), telecommuted, and guess what? They love it here: “Will they stay, or go back to Wellesley or Newton? We don’t know, but we do know that while our real estate is unaffordable compared to Cape Cod wages, compared to New York and Connecticut, believe me, we’re affordable.”
3) Millennials, in their 30s, working remotely already, showing up in large part because “what they liked about the city they couldn’t do for a year.” They could go back, they could stay, but now they’ve gotten a taste of the Cape, and they’ve added plenty of fuel to the market.
Snapshot:
Median household income as a percentage of income needed to qualify for a mortgage on a median-priced home: 64 percent
Sarah Pechukis has deep Wellfleet roots, raised her family here, started her own real estate business 25 years ago and has since joined the William Raveis group. “For the first time, I’ve been having a crisis in my own mind,” she says. “Yes, 75 percent of what I sell has always been to people not here year-round, but I’ve always been able to balance that, put year-round people first. My two best, most satisfying sales in 2019 were for under $400,000 to year-round people. It took a long time but we did it.”
Now, nothing in Wellfleet is on the market for less than $600,000, and there are only a handful of listings. It used to be that Pechukis might show a house 20 or 30 times over the course of three months; now she’ll do that in two days, “a hyper-condensed thing.” A house on the market for $750,000 might sell for much more, perhaps $900,000, and “this jump up is not disappearing anytime soon.”
The town has an affordable housing project moving forward, and an article on the town meeting warrant to allow homeowners to create “accessory dwelling units” for year-round rentals. Both will help, she believes, but that doesn’t change the big picture: “My year-round people are miles away from buying a house.”
Snapshot inventory in sample towns small and big:
Wellfleet homes for sale, 4/21: 5. A year ago: 33
Barnstable homes for sale, 4/21: 95. A year ago: 227
Harwich homes for sale, 4/21: 16. A year ago: 85
Truro homes for sale, 4/21: 3. A year ago: 48
Orleans homes for sale, 4/21: 22. A year ago: 99
Chatham homes for sale, 24/21: 48. A year ago: 154
Sandwich homes for sale, 4/21: 29. A year ago: 120
Steve Flynn is another Realtor with deep roots, a stalwart in the Cape Cod cooking scene before he got into real estate, 20 successful years in sales, now with Kinlin Grover. He also has improved and manages small clusters of units he owns and rents in multiple Cape towns.
“It’s always been a struggle,” he says, “though the summer-winter thing kept a lot of people afloat.” That dynamic -- cheap seasonal rent and then a summer scramble -- is vanishing. Plus, the combination of skyrocketing building costs and tight zoning means that if someone on Cape Cod wants to build a housing unit, “that’s going to cost $400,000, more or less. How is that sustainable, to spend $400,000 for a low-income apartment?
“I’ll share a personal aside,” he adds. “I’m no Communist, believe me, but I find myself questioning the equitability of private ownership. Someone is paying a landlord $1000 a month for one small unit, year after year. Isn’t there some way to offer that tenant something tangible? Isn’t there some way to open up ownership somehow?”
Meanwhile, the anecdotes mount: A house offered at $650,000 sells for $850,000, a condominium that sold for $269,000 in 2017 will likely sell for more than $350,000. And unless there is some kind of catastrophic event, no one sees prices falling back:
Too much demand.
Too much disposable income off-Cape.
Not enough supply.
COVID upping the ante.
NEXT: WHAT THE FRONTLINES OF FREE ENTERPRISE “AFFORDABLE HOUSING” REALLY LOOKS LIKE — WHICH MEANS FINDING A GUY NAMED RONNIE BOURGEOIS.
Quick note on these snapshot stats: All are from the Multiple Listing Service report for April 2020. MLS is a great indicator of relative activity but is not truly comprehensive because some properties never reach the MLS list (including many commercial sales). High-end residences, for example, can move quietly, without the property entering this more public group format.
Big thanks to Ryan Castle, CEO of the Cape and Islands Association of Realtors, for sending along the reporting, which updates monthly.
Thank you Seth for this important article. Looking forward to the next! In general though, I feel tired and discouraged by all the inequity. Looking for ways forward to both year-round rentals and affordable home ownership. I don’t know if anyone will talk to you but I often think of the wonderful HUD program that helped (a leg up not a handout) Gary Joseph, Rosanna Bertrand, Janet Doherty (she def won’t be speaking to you) -and others group build their own homes with guidance from Johnny Newman. Most of those people still live here, raised their kids here, kids are now living here… we need more of these programs (oh, and some land)
May I post this on Facebook?
Hi all, my proofreader -- that would be me -- didn't catch a goof. The latest stats are all from 4/21, not 4/20. So this is comparing last month to last year. Aaaarrgghhh, sorry for any confusion.