Island Economy Holds Strong in 2002; Land and Home Sales Point the Way
By JONATHAN BURKE
Looking back over 2002, the Island's economy showed strength during a year of uncertainty and possible war.
Land, the Island's most formidable asset, held its value. According to James Lengyel, executive director of the Martha's Vineyard Land Bank, land and housing values grew in 2002. Land bank revenues for the six-month period from July 1 to Dec. 31 were up 12 per cent over the first six months of 2001. Transactions were up four per cent.
Mr. Lengyel said the lower sector of the market, the $300,000 range, softened this year. But as a whole, he said, land and housing remained strong. Either way, with $9 million in reserves the land bank is ready for a down year.
"For two years now we have been anticipating a downturn and planning for one, and so far it hasn't come," said Mr. Lengyel. He said he remembers a time when the land bank only had $2 million in reserves.
This year, the land bank conserved 151 acres and expended $6,438,000 on those purchases and the management of other land. The average cost per acre for the last 10 transactions, according to Mr. Lengyel, was $60,555.
"People who sell to the land bank are giving the land bank a fair deal," said Mr. Lengyel.
Mr. Lengyel said calender year revenue was down about 10 per cent. In light of strong land values, he dismissed the calender year drop as a "paradox."
David Thompson, a broker with LandVest, characterized the high end of the market, the $5 million segment, as in good shape.
"We've got the figures through October. I would generally characterize the high-end market as being good in 2002, [although] not as good as the previous three years," he said. "Our perception is that buyers have not gone away forever. They have deferred to the extent that the market was quiet."
He said lower interest rates have continued to prop up the lower segments of the market because money is cheaper to borrow, and said he expects growth in 2003.
"One of the things that gives me some comfort is that the baby boomers and the people younger than that are a generation that is accustomed to living well," he said, "and I don't think they are going to deprive themselves of that."
Also exhibiting strength this year was the commercial lending sector.
"On the Vineyard, we probably did in new loans somewhere in the neighborhood of 20 to 25 million dollars," said Paul Watts, commercial lender at Compass Bank. "In general, my clients were up a little."
As the largest lender on the Island, Mr. Watts said, Compass is servicing about $90 million in loans overall - everything from bed-and-breakfast inns to construction.
"I'm backlogged with several new loan applications," he added.
Mr. Watts did admit to a spottiness in the economy. He said strong sales this year depended on creative measures such as offering discounts early in the season. But he said he remains "cautiously optimistic" for the year ahead even though "the amount we're going up each year is slowing down."
Growth in the retail sector also slowed a bit in 2002. Both Laurie Welch, co-owner of Basics, an Oak Bluffs clothing outlet, and Annie Nelson, owner of Bunch of Grapes, said sales softened over a year ago.
"The summer was decent, the fall was weak and Christmas was weak. So net-net the year was weak," said Ms. Welch.
"It baffles me. I don't know why," she added. "We certainly haven't raised prices or anything . . . . I don't know whether there is fear and uncertainty out there or what."
But business was by no means bad. Ms. Welch said her business sustained the growth it had achieved from 2000 to 2001. And the day before Christmas, she added, was out of control.
She is also Greenspan-like in her prognostication, calling herself "cautiously optimistic for the year ahead."
Ms. Welch said she and her husband will plan in 2003 "on being even" but will look for goods that she can buy now and place reorders on quickly "if the economy looks like it will pick up." Ms. Welch, who also owns Eastaway, said she was worried about world affairs. "If people in the cities get jitters they might hunker down at home," she said.
Over at Vineyard Haven's bookstore, Ms. Nelson attributed soft sales to the lack of a blockbuster book this year or a new book by an Island author.
"We're in a very different spot in the bookstore," she said. "Unlike most retailers, our business depends on what's being published and who's writing what. It was very clear this year that we didn't have a blockbuster Island book or a John Adams."
Bunch of Grapes sold 3,000 copies of John Adams last year.
"There's no doubt about it that this year is a cautious spending atmosphere," she added. Furthermore, she said, "I did not see the number of off-Island checks that I normally see."
But that did not stop the holiday festivities at Bunch of Grapes. While sales may have been down, provisions of egg nog were up. Ms. Nelson increased her holiday stocks this year by 25 per cent, serving 75 quarts of egg nog at various times during the holiday shopping season.
"The festivity was there. but due to the lack of a blockbuster or cautiously spending the dollar per sale was not there. But hey, we had a great Christmas," the book store owner concluded.
For investors in the stock market, the year offered little good news overall.
According to Ray LaPorte, a financial advisor at Advest in Vineyard Haven, "The stock market is the only place that people are afraid to buy discounts."
He advises people to hold on to equities: "Sticking with your investment portfolio is a sound way to build income. It's just scary times," he said.
Interest rates in certificates of deposit and money market accounts are also quite bad, Mr. LaPorte said, making high grade corporate and municipal bonds more attractive.
"People have shied away from equity investments and have gone to fixed income, primarily from high-grade corporate or municipal government issues to try and enhance interest that has been lost," said Mr. LaPorte.
Mr. LaPorte encourages people with the means to look at the stock market. "In there lies opportunity. This is the end of a third down year. The last three-year-in-a-row downturn in the market occurred in the thirties," he said.