The real estate market on the Vineyard had already begun to see a sharp downturn this year, and the recent collapse in global financial markets and turmoil on Wall Street certainly has not made things better.
Statistical evidence gathered from Banker and Tradesman online, which compiles real estate figures from sale documents, shows the Dukes County housing market is off sharply from last year, with sales down almost 15 per cent and prices off by more than nine per cent.
New elements of uncertainly in the Island real estate market have also produced new methods of selling, as evidenced by the current 10 per cent off sale being advertised by Coldwell Banker Landmarks Real Estate in Vineyard Haven.
Part of a national Coldwell Banker promotion, the sale runs through Oct. 19 on 15 selected Vineyard properties.
But even with 10 per cent off, some potential buyers have gotten cold feet at the eleventh hour, said Judith Federowicz, a realtor and owner of Coldwell Banker Landmarks Real Estate. She said two sales fell through this week as a direct result of the volatile national economy.
“One was for [questionable] credit and the other had to do with the stock market. The person’s funds were connected to a hedge fund and they were uncomfortable with the changing market and stepped away,” she said.
Mrs. Federowicz remains optimistic that the slow real estate market here is only temporary. She said there are plenty of interested and capable buyers, although they may be inclined to wait and see what happens with the national economy and Island housing market before making a move.
“People want to see how things fall. On the one hand you have people with funds available who see a great opportunity to take advantage of some great buying opportunities that weren’t previously there. On the other hand you have cautious sellers who are not going to lower prices because of temporary fluctuations in the market,” she said, adding:
“I think there will be a healthy market come next summer; it just may take a little time to sort this all out.”
Alan Schweikert, owner of Ocean Park Realty in Oak Bluffs, said the sluggish market has prompted some sellers to take their homes off the market, although most of those are still listening to offers and would sell for the right price. He said the average time for homes to stay on the market is now well over a year; which is in sharp contrast to previous years when homes would sell in a matter of months.
He said some sellers have lowered their asking price, although others are waiting to see what happens before changing their price. He said the trend is for lower-end homes — those selling for between $500,000 and $700,000 — to be more affected by the economic crisis and to stay on the market longer.
The buyers and sellers of higher-end homes — those that sell for $2 million or more — are less likely to be affected, he said.
“As a general rule those people who can afford to buy a $2 million home on the Vineyard are more insulated from changes [in the economy]. It’s those people looking to buy a home for $500,000 or $600,000 who may get frightened more by a down economy,” he said.
Abby Rabinovitz, principal of Tea Lane Associates in Chilmark, confirmed sales at her firm are down from last year. “It’s a challenging market, there is no question. But we’ve seen slow times before and it’s always picked up,” she said.
Ms. Rabinovitz agreed people looking for more expensive homes are less likely to be pushed out of the market. She said she doubted the real estate market here will experience a prolonged downturn, due to the marketability and natural beauty of the Island.
“People still want to live here and they will always want to live here. That will never change,” she said.
Chris Wells, president and chief executive officer of the Martha’s Vineyard Savings Bank, said the Vineyard economy is in better shape compared to other markets because local banks, for the most part, did not get involved in subprime lending.
“We didn’t get into situations where we were overextended. That may have drawn criticism from some potential buyers [who did not qualify for loans], but as a result our delinquency rates are fairly low and our loan values are fairly conservative in aggregate,” he said.
Mr. Wells drew comparisons between the current economic crisis and 1987 when stock markets around the world crashed. That crash had a tangible effect on the Vineyard real estate market, although he noted the market of 20 years ago was elevated by a different type of leverage.
“Back then the people buying homes on the Vineyard for the most part did not live here; they were buying homes simply as investments. This time around the market was driven by actual homeowners, many of whom speculated themselves by purchasing a home. They figured they would enjoy the home for a few summers and then sell it for a profit,” he said.
Mr. Wells said he has seen evidence that the construction industry, which is closely tied to the real estate market, is also going through a flat period. But overall, he said homeowners with mortgages are not having a hard time paying their bills; delinquency rates are low and deposits are steady.
But he said it is hard to predict when the real estate market might pick up, largely due to the tentative nature of both buyers and sellers. “Right now it’s a little tug of war between the buyers and sellers . . . it may come down to who blinks first,” he said.