The gradual two-year decline of residential home sales now resembles a bobsled run: it’s picking up speed but has some interesting twists and turns.
Sales of residential homes were off 18 per cent in January, worsening in February with sales declining by 33 per cent and the value of sales that month off more than 70 per cent, according to LINK, a real estate reporting agency on the Island. Prices of houses that do sell are generally 10 per cent below asking price.
March business has not improved over February. The Martha’s Vineyard Land Bank Commission reported only two transactions for the week ended March 17 that generated fees for the land bank, compared with 17 such transactions in the comparable week last year.
While the paucity of sales so far this year has realtors predicting a thinning of their ranks, some success stories also can be found.
Island bankers are content with refinancing levels and are seeing clear and growing demand for commercial lending projects on the Vineyard.
With few houses selling, residential realtors had little to say about sales although they report cracks in the price stalemate between buyers and sellers, including some creative seller offers. Buyers are in good supply, they say.
High-end home sales are less sensitive to the real estate slump. Middle and low-end homes are most difficult to move, realtors say, although LINK owner Eleanor Wilson pointed to five sales between $500,000 and $800,000 in Edgartown — in February.
Sellers face difficult decisions. This week, a builder/renovator who declined to be named got a cash offer for a fixer-upper he bought 18 months ago. Though the offer was 30 per cent below his expectations based on value in 2006, he took the offer and made some profit.
“Are we leaving money on the table?” he asks. “Probably, but with this market, how do you know?”
The land bank reported year-to-date transactions are 8.5 per cent below last year and 15.7 per cent below 2006. The rate of sales decline has accelerated in recent months.
James Lengyel, executive director of the land bank, said: “The numbers speak for themselves. However, we were expecting (a downturn) and budgeted accordingly.”
The land bank collects a two per cent transfer fee on many real estate transactions.
Cautious buyers are keeping one eye on the Dow Jones Industrial Average and the other on thoroughly investigating properties, said Dale Julier, owner of Stony Hill Realty in West Tisbury.
“They come to us better prepared than ever and they want to know rental income history, number of owners, neighborhood values, etc.,” she said.
“They are on the Internet, doing their homework,” said Ms. Julier who recounted a recent sale that closed only after three price reductions brought the price to 11 per cent below the initial asking price.
And while inventories remain high, with more than 800 homes on the market, bottom-feeders with expectations of 20 and 30 per cent price cuts will be disappointed. Many Island listings are second homes owned by financially secure people who do not have to sell, realtors say.
“There’s a big difference between now and the early ’90s when the market went crazy, attracting highly leveraged speculative buyers who went down when the market fell,” said Sharon Purdy of Sandpiper Realty in Edgartown.
“This time we have owner/sellers more vested in the Vineyard. They weren’t just buying value appreciation, they were buying community living,” she said.
Ms. Purdy recently sold a 10-year-old house for its original owner for $598,000. The house might have sold for five to 10 per cent more in 2005, she said, but the long-time owners “put a lot into it and got a lot out.”
Patty Kendall of Kendall & Kendall Real Estate in Vineyard Haven was almost apologetic about her mostly high-end business.
“We’ve sold five properties since November and another set to close in April. Luck? Hard work? I don’t know,” she said. “There is more room to negotiate, more flexibility among sellers.”
“People are looking, mortgage money is available and rates are down. We work primarily with Island banks and they are lending,” said Kathy Sollitto, owner of Sollitto Associates in Vineyard Haven.
“We saw a seller recently offer to pay the land bank fee (two per cent), a creative incentive the market hasn’t seen in a while,” she said.
“The Island is a different animal. We are a second-home market. Yes, prices and transactions are down but there are lots of opportunities. We’ve seen this before. Prices will come back,” Ms. Sollitto said.
While sellers can afford to wait for their price and buyers can kick real estate tires indefinitely, real estate professionals who depend on closings for their livelihood may not be able to wait.
“We have a couple of hundred brokers chasing three or four sales a week,” Ms. Julier said.
“It’s difficult to have to depend on commission income and support a family in this market,” Ms. Purdy said. She estimates the Island has 84 realty offices and up to 500 realtor licenses.
The number of participants in new realtor orientation classes on the Cape and Islands has slipped dramatically from 20 to 25 in a class last year to four or five participants in recent classes.
Bankers, however, say their residential mortgage and mortgage refinancing business is solid and they are ebullient about demand in the commercial market.
“Residential buyers are being cautious,” said Paul J. Watts, senior vice president at Bank of Martha’s Vineyard. But, he said, commercial business is strong.
“Very strong . . . and good-sized projects. That’s good for the long-term Island economy,” he said.
Island banks are benefitting from the withdrawal of many banks from the lending scene and the refinancing of exotic loans that make homeowners uncomfortable today, said Brad Egan, executive vice president of lending at Martha’s Vineyard Savings Bank.
“(The residential sale) business is slower, but lots of people are cleaning up their financing, coming in to refinance,” he said. “The core business is good and commercial is surprisingly strong. Commercial business ranges from local businesses buying places they are in or will move to and investors buying commercial properties to lease,” he said.
Perhaps as a result of banker exodus, the bank now is ranked by Banker & Tradesman, a trade publication based in Boston, as the largest residential mortgage lender to the Island borrowers among all banks doing business on the Vineyard.
In fact, Martha’s Vineyard Savings, Sovereign Bank’s Bank of Martha’s Vineyard and Edgartown National Bank combined have more than 25 per cent mortgage market share, the most dominant local bank market share in the state, according to analysis of Banker & Tradesman statistics. Island banks wrote 11 mortgages in a week where only two home sales were recorded, according to the publication’s data.
Fielding Moore, executive vice president and chief executive officer at Edgartown National Bank, likes what he sees.
“Rates are down. Debt service (loan and mortgage payments) is steady. Commercial business is very positive. People are optimistic. We’re seeing more commercial expansion planning. Commercial doesn’t seem to have the gloom and doom here as elsewhere,” he said.
Realtors report strong early rental bookings for the summer season and Steamship Authority advance bookings are positive. Several realtors believe the economy and falling U.S. dollar are keeping more vacationers in the country, which favors the Island in the coming season.