Island Real Estate Sales See Second Quarter Gain With Few Mortgage Ills
By JACK SHEA
As a widening home mortgage crisis ripples through national financial markets, positive trends in the second quarter indicate that the Vineyard real estate market has stabilized and is even showing growth.Patience and supply and demand, the ultimate self-correcting economic process, was at work in the Vineyard market during the three-month period which ended June 30.
More than 11 per cent fewer properties sold, but the median sale price rose five per cent compared with the same period in 2006, according to figures provided by LINK, a real estate data reporting service which compiles information for more than 90 per cent of Island real estate businesses. Results differed widely by community.
Realtors and mortgage lenders say they are buoyed by the second-quarter results on the eve of Labor Day, traditionally a prime selling period here.
"Buyers are now understanding that sellers, for the most part, don't have to sell. They can wait for their price. Buyers have been taking their time because they want to buy at the bottom of the market," said Paul Watts, senior vice president at Bank of Martha's Vineyard.
The waiting may be over, according to bankers and Realtors who say they are seeing an upsurge of buyer interest and activity.
Sandpiper Realty owner Sharon Purdy said she sees the market returning to its traditional cycle of strength in the second and third quarters. Patty Kendall of Kendall and Kendall said she believes the third and also the fourth quarter will be the year's strongest.
"We had some closings in the spring, not as many as we normally have but beginning in July, all three of us (agents) have been busy and we are out straight in August," Ms. Kendall said. "We will close several houses this month."
Virtually every broker contacted commented on a new positive rhythm to their business following a period of speculative real estate buying as investment in the late 1990s.
The rising tide does not affect all real estate boats, however.
At the low end of the market, considered $500,000 to $1 million, properties are selling for lower prices and the effects of subprime financing are evident.
"Sellers at that price point know that if they don't sell now, they are likely to service their mortgage debt until next April and many don't want to do that," said Chris Wells, executive vice president for Dukes County Savings Bank.
Mr. Wells said he is seeing a 10 per cent reduction in prices in the low end of the market.
Mortgages written for the first six months showed a huge shift from mortgages to purchase homes to refinancing existing homes, which may signal a scramble to replace variable rate and subprime mortgages with conventional financing.
For some, Mr. Watts said, "It's just easier to add a room than wait for prices on a bigger home to fall."
Bill LeRoyer of Harborside Realty said he believes the bottom-price tier has the most tension and the most risk.
At most, he estimates three to four per cent of the Vineyard housing stock may be affected as adjustable-rate second mortgages come due. There may be some foreclosures coming, he said. At present only three foreclosure public notices have been published in the Gazette over the past six weeks.
"The Island is not the same as the mainland," Mr. LeRoyer said. "Eighty-five per cent of the houses purchased are vacation homes. Only 15 per cent are Island resident homes and we're talking about maybe 10 per cent of the 15 per cent" as potentially troubled.
Mr. LeRoyer and other brokers expressed relief that Island banks generally keep their mortgages in their own portfolio and therefore have limited exposure to the troubled mortgage marketplace.
But Fielding Moore, chief executive officer of Edgartown National Bank, said his bank is doing a strong business in adjustable rate mortgages.
Despite the alarming news in the daily print press about high-risk mortgages that have gone sour, Mr. Moore said there are still credible adjustable rate mortgages available.
Noting that the subprime lending market has offered mortgages not in the best interest of the customer, Mr. Moore said: "We are a community bank. We need to take care of our customers, rather than be hit-and-run profit-takers. Some subprime lenders have given [adjustable rate mortgages] a bad name."
First-time vacation home buyers, who bankers say are often stretched to put together a financing package they can afford, may feel the effects of the tightening credit market.
But there's none at the high end - $3 million and up. "They pay cash," one broker said.
What follows are second-quarter real estate market results for the Island as a whole and for individual communities.
The average median price of houses selling Islandwide rose just over five per cent to $705,000 from $671,250. The number of homes sold declined by 11.7 per cent to 83 from 94 a year ago.
The inventory of houses for sale declined about nine per cent, from 549 last year to 500.
The median value of land sold during the second quarter declined just over two per cent to $375,000 from $383,250 in 2006. The number of land sales decreased 10.5 per cent to 17 from 19 in the previous year.
Islandwide, home buyers and sellers took three months longer to do business, as median average days on market rose dramatically to 334 from 241 days in 2006, an increase of 38.6 per cent.
Edgartown posted gains in both homes sold and selling prices. In Vineyard Haven and West Tisbury, fewer homes sold but at higher prices. Oak Bluffs experienced a dramatic decline in both houses sold and selling price.
Four properties sold in Aquinnah during the second quarter at a median price of $1.32 million compared with one property in 2006 with a median value of $487,000.
Four properties sold in Chilmark during the second quarter at a median price of $1.33 million compared with four properties in 2006 with a median value of $2.1 million. In Chilmark, where the inventory is small, median price was affected by one large residential sale and one small residential sale in 2007.
Edgartown was clearly the winner among the six Island towns in the second quarter with home sales up 37.5 per cent to 33 from 24. Median value rose 14 per cent to $857,500 from $747,000 a year ago. The median days on market was 296 days in 2007 compared with 226 in 2006.
Realtors credited the turnaround with seller patience, buyer recognition that prices were firm and, perversely, valuing real estate as a better investment than financial markets.
Fifteen Oak Bluffs properties sold for a median price of $535,000 compared with 30 properties at a median price of $632,500. Realtors said sellers have resisted reducing prices, but there are signs that sellers are ready to make adjustments with winter coming.
The median price in Oak Bluffs was deflated by the sale of four condominiums at an average of $350,000. The town also had four sales over $1 million.
Seven properties sold in West Tisbury in the second quarter compared with 12 properties a year ago. Median price increased to $980,000 from $759,500 in the 2006 period, but the number may be misleading because of a small number of sales at widely different prices.
Twenty properties sold in Vineyard Haven in the second quarter compared with 23 properties in the prior year quarter. The median price rose to $687,500 from $647,500 in the prior period.