Prices Remain High at Bottom of Market

By JAMES KINSELLA

The floors of the houses tend to be linoleum or older carpet, or perhaps cheap pine. The windows often are nondescript, the detailing undistinctive, and the lots small.

But if you can lay hold of between $400,000 and $500,000, chances are that one of these less-than-pristine homes on Martha's Vineyard - the bottom of the Island real estate market - can be yours.

"They're a good opportunity to get into the market . . . especially for a young couple who can put in some sweat equity," said Alan Schweikert, owner of Ocean Park Realty Inc. in Oak Bluffs.

There aren't many of these homes. Of the 391 properties with buildings listed for sale this week on Martha's Vineyard, only 40 were available for $500,000 and under. Ninety per cent of the listings cost more.

Sales of Island homes for under half a million dollars also are far and few between. LINK, a Vineyard Haven service that tracks arms-length real estate transactions on the Island, lists nine houses that sold on the Vineyard in the last three months of 2005 for $500,000 or less. That's out of 119 properties with buildings on them that sold in arms-length transactions on the Island in that period.

The LINK report shows that the pace of Vineyard real estate sales slowed in both the fourth quarter and for all of 2005. For the last three months of 2005, the number of properties with buildings on them that sold dropped 21 per cent from 151. For the year as a whole, sales in the same category declined 14 per cent to 455.

Inventory has continued to build in the category, rising 23 per cent to 377 in the fourth quarter compared to a year earlier.

Median prices in the fourth quarter continued to move up in two of the three towns with the most sales, Oak Bluffs and Vineyard Haven. In those towns, the medians rose 57 per cent to $692,500 in Oak Bluffs and 17 per cent to $670,000 in Vineyard Haven when compared with a year earlier. In Edgartown, the median stayed fairly flat in the fourth quarter, dipping five per cent to $717,500.

The Vineyard sales medians apparently are among the highest in the state. The Massachusetts Association of Realtors reports that the statewide median for detached homes in the third quarter (the most recent quarter available) was $370,000. The three areas with the highest medians were Boston area, $515,000; northeastern Massachusetts, $408,000; and Cape Cod and the Islands, mostly representing Cape properties, at $385,000.

The national median sales price for 2005, reported by the National Association of Realtors, was $207,300.

According to LINK, Edgartown saw just one arms-length home sale for less than $500,000 in the last three months of 2005: a three-bedroom, 960-square-foot ranch on a third of an acre on 12th street South. The property sold for $450,000.

Sales for less than $500,000 in Oak Bluffs included a three-bedroom, 912-square-foot ranch on June avenue for $420,000; a one-bedroom, 546-square-foot Victorian on Ocean avenue for $429,000; and a two-bedroom, 1,144-square-foot ranch on Monahegan avenue for $485,000.

West Tisbury even had a $400,000 sale: a three-bedroom, 1,820-square-foot ranch on Old County Road.

Young couples are just the start of the potential demographic pool of buyers for what passes for the low end in Vineyard real estate. There are contractors looking to refurbish houses and sell them at a higher price. There are pre-retirees looking for what will become a retirement home. There are investors counting on rising real estate values. There are Brazilian families looking to set down roots in a new land.

"There are some people who have been living here year-round, people who have been renting, people who have small businesses, summer visitors interested in getting into the market," said Fred Roven, the owner/broker at Martha's Vineyard Buyers Agents.

Some buyers bring a healthy wad of cash to the table, money that came from a home equity line on their mainland residence or through an inheritance.

Others finance most - or all - or more than all - of the transaction.

Robert Murphy, the owner of Towne and Country Realty in Oak Bluffs, has seen deals where financing accounted for 103 per cent of the purchase price. "I've never seen financing as loose as it's been," said Mr. Murphy, who has sold Vineyard real estate for the past 35 years.

A house on Pine Tree Lane in Edgartown that sold last year for $400,000 was financed with a mortgage loan from a California mortgage company totaling $540,000. Six years ago, the same address sold for $188,300.

"We definitely have seen an increase in our loan-to-value ratios," said Christopher Wells, president of the Dukes County Savings Bank.

Mr. Wells said many first-time home buyers or purchasers of youth lots in Vineyard towns are using 100 per cent financing, mixing 80 per cent traditional financing with 20 per cent soft second mortgages where government subsidies partly cover the payments.

Real estate brokers say the bulk of these less expensive houses can be found in Edgartown, Oak Bluffs and Vineyard Haven. They tend to be Capes, ranches, saltboxes or bungalows. Many of the houses were built between the 1960s and 1980s. A number are older homes in the Camp Ground or in the Highlands sections of Oak Bluffs.

Much of the value in the listings can be found in the land. Stephen Robinson, a sales broker at Harborside Realty in Edgartown, said a lot of slightly more than a quarter-acre can carry of value of $325,000 to $350,000 before the building on the lot even is considered.

Brokers say the law of supply and demand has pushed Vineyard real estate prices to their current levels, aided by the limited amount of land inherent on an Island and the Vineyard's regional, national and even international appeal.

The sellers of the lower-end houses often are older couples, or an older person who has lost a spouse, who have lived in the houses for many years and decided to leave an Island where the cost of living is increasingly expensive.

Mr. Murphy said buyers are poised to pursue what they see as value among these less expensive listings. "On something that's really priced right, it will move in days or weeks," he said.

Brazilian immigrants are a growing niche in the less expensive section of the Vineyard real estate market. Stephen Robinson, a sales broker at Harborside Realty in Edgartown, has been making sales to Brazilian immigrants over the past six years.

Mr. Robinson said the immigrants, often part of extended families, support the mortgage payments by pooling the income of several adults who live at the property.

The high loan-to-value ratios found in many of these deals make some brokers, who remember the recession of the late 1980s, nervous. Mr. Schweikert called financing at 100 per cent or higher "a dangerous situation."

The payments can be daunting. A $400,000, 30-year loan at 6.5 per cent translates into a monthly payment of $2,528 before taxes or insurance payments are added.

Mr. Robinson said he would be more concerned about a highly leveraged situation where a single tradesman is the principal payer of the mortgage, compared to a Brazilian where multiple incomes (often two jobs per person) are part of the income flow. Even if one person loses one of his jobs, Mr. Robinson said, the overall effect on the income flow isn't large.