Real Estate Demand Is Steady; Inventory Rises In Sales, Rentals

By JAMES KINSELLA
Gazette Senior Writer

A swelling inventory of unsold Vineyard properties is translating into choosier buyers and tenants.

Demand remains alive for real estate on the Island. Results compiled by LINK, a Vineyard Haven business that tracks the Vineyard market, shows that 122 Island properties with buildings on them sold in the quarter ended Sept. 30. That is one more property than the comparable period a year ago.

But LINK also reports that the inventory of such properties on the Vineyard climbed to 390 for the quarter, 25 per cent higher than the same period last year.

The increase in inventory has given prospective buyers more choice, leading some to make offers below the asking prices, and others to wait for more attractive deals to materialize.

Brokers say the trend does not signify a buyer's market, let alone the popping of a real estate bubble. But they confirm the seller's market of recent years is now a rapidly fading memory.

"It's more in the middle now," said Jean Kelleher, who owns Kelleher Real Estate Services in West Tisbury, about the balance between buyers and sellers.

The Vineyard is not alone. Real estate markets across the nation, including Boston, are slowing. The Commerce Department reports that the median sales prices slipped 5.7 per cent in September and that sales of new homes fell short of expectations.

Ms. Kelleher said properties priced properly will sell, while those priced at higher levels might not.

"I think the market's been trending sideways and is going down a little bit," said Jim Feiner, the owner of Feiner Real Estate in Chilmark. "It's not appreciating like it was, especially up-Island. This is an overdue correction."

Kathy Sollitto, owner of Sollitto Associates, agreed. "I think the real estate market has slowed," she said. "There's a little more negotiating going on." But Ms. Sollitto said buyers still are out there.

Tom Wallace, a partner in Wallace and Co., said he sees strength in the current market.

"We're clearly seeing appreciation in the market with few exceptions," Mr. Wallace said. "On one hand, there's a reduced number of transactions. On the other, there are more dollars per transaction."

Meanwhile, a number of Vineyard owners appear to be following a strategy of "if you can't sell, rent," in order to apply rental income toward carrying costs such as mortgage and tax payments.

But the inventory increase in rental properties also constrains owners from driving too hard a bargain with prospective winter or year-round tenants.

Susan Austin of Austin Real Estate Properties characterizes the current Vineyard rental market as "flooded, much like the sales market. There's so much available."

Alida O'Loughlin decided to more or less hold the line for winter rent on an apartment she owns in Oak Bluffs. Last year, she charged $500 a month plus utilities; this year, she is charging $750 with utilities included.

"I rented it fairly quickly," said Ms. O'Loughlin, who advertised the rental in mid-October. "I tend to think the price was right. Also, it's a very nice apartment. It's comfortable. I would like to live in there."

Ms. O'Loughlin, who also sells real estate, said the current market recalls another in the late 1980s, when demand failed to meet swelling inventory.

"It's a correction," she said.

As of earlier this week, a three-bedroom house in Oak Bluffs within walking distance of the Lagoon had yet to acquire year-round tenants, despite recent refurbishing and a drop in the proposed rent from $2,200 to $1,900 a month, in both cases plus utilities. Ms. Austin is handling the rental.

"I had three people very interested," she said. "It's been close, but no potato."

People poring over market indicators are finding a mixed bag.

LINK reports that the number of Vineyard properties with residential buildings on them (the category includes condominiums) totals 336 for the first nine months of the year. While that is down from the 378 sales recorded for the same period last year, it is also higher than the comparable periods in 2001 through 2003.

Land sales, however, have trailed off over the past five years, dropping from 115 in the first nine months of 2001 to 68 in the comparable period this year.

Median residential sales prices have kept moving up, according to LINK comparisons of third quarters in recent years on the Vineyard.

In the Island's three most populous towns, the median sales price over the past year has climbed to $765,000 in Edgartown (a 31 per cent increase); to $593,100, in Oak Bluffs (a 16 per cent increase); and to $650,000 in Vineyard Haven (an 18 per cent increase).

At the Vineyard Gazette, published column inches of real estate rental classified ads stayed fairly even between the last four issues of October 2004 and the last four issues of October this year.

The real jump came in classified advertisements for houses for sale, where the number of ads for those four issues climbed from 32 to 52, and column inches leapt from 124 to 208.

As inventory climbs higher on the Vineyard, a number of owners are deciding to drop their asking price to entice buyers.

For example, in January, a four-bedroom house with views of Vineyard Haven harbor was listed for sale at $2 million. The price now has been reduced to $1.85 million.

Despite some slight property price reductions, Island brokers say many owners still will realize a substantial profit, given the rapid price appreciation in recent years on the Vineyard. Over the past five years, according to LINK, median sales prices have almost doubled in Oak Bluffs, while rising 33 per cent in Edgartown and 44 per cent in Vineyard Haven.

Further, Island brokers say the special nature of the Vineyard market - predominantly second homes sold to affluent, geographically dispersed buyers - provides a level of protection not necessarily available to markets characterized by primary homes and hourly wage earners.

Steve Gentle of Gentle's Realty Co. in Edgartown and a third-generation broker, can testify to the shift in the Vineyard market. Mr. Gentle said the quiet, low-key buying that once typified the Island second-home market has given way to a much more wide-open situation.

"Now, it's become a global market," he said. "They're all over the Island - prices have gone through the overhead."

Even the recent rise in long-term interest rates over the past year is less of a damper than might be expected. Mortgage debt often is not much of an issue for many Vineyard property owners or prospective buyers.

Freddie Mac, a corporation chartered by Congress that buys home mortgages from lenders and packages them for sale to investors, reports long-term interest rates have climbed from about 5.64 per cent a year ago to about 6.15 per cent now.

"My sense is that we have less debt on the Vineyard," Mr. Wallace said. "Many properties have no debt on them, especially those that sold for $1 to $2 million or more."

Fielding Moore, chief executive officer at Edgartown National Bank, said he senses a lot of strength in the Island real estate market. "I'm not pessimistic about Vineyard real estate values," Mr. Moore said.