Nantucket realty sales skyrocket
NANTUCKET -- It's a bit of a mystery. In the first half of the year, real estate sales on this resort island were sluggish. Then, in early July, they suddenly took off, smashing all monthly records in September, then again in October, and far outpacing the more moderate sales gains seen in most other parts of the state, including Martha's Vineyard.
"There's been an explosion," said Douglas Foregger, chief executive of Country Village Rentals & Real Estate.
September saw a monthly record with $123.9 million in sales, nearly $40 million of which occurred in just one week, about $10 million more than the city of Boston recorded in residential sales during the same seven-day period. Nantucket's monthly record was broken again in October, with more than $150 million in real estate changing hands. So far through November, nearly $560 million in real estate has been sold on the island, very close to the annual record of $628.5 million set in 2000.
The big question is why. Ask 10 people to explain Nantucket's phenomenal surge, and you'll get 10 different responses.
"I don't have the answer, but I witnessed it," said Mark Donato, who has run the general store Sconset Market for 20 years and who made a tidy profit off buying and selling quickly what he planned to use as a rental investment this year.
Among the theories are: This year's rising stock market has made affluent consumers more confident to make big purchases again. And, because of their scarcity, Nantucket properties are now regarded as ideal blue-chip investments, safer than money in the stock market. In addition, new amenities, including a golf club and a planned yacht club, have made the small island, with a 9,520 year-round population that swells to 60,000 in the summer, an even more attractive hideaway for the super rich. Low mortgage rates have helped spur sales at the low end, which on Nantucket is a home that costs $1.7 million or less. Those who buy more expensive properties often pay in cash.
Then there is the Lou Gerstner theory. In early summer, word got out that former IBM chief executive Louis V. Gerstner Jr. and his wife had agreed to spend $12 million for a five-bedroom house and an adjacent lot with harbor views.
According to realtor H. Flint Ranney of Denby Real Estate Inc., the news of such a sizable deal propelled other buyers who had hoped prices would come down, and several other multimillion-dollar transactions quickly followed. Word of the Gerstner purchase came just as national economic indicators were pointing toward a rebound.
"The minute people heard [about Gerstner], it changed the psychology of the market," Ranney said. "All the brokers on the island called their clients and said, `This is what's happening.' "
Not everyone buys the Gerstner theory. Famous corporate names routinely make big purchases on the island without touching off a land rush. In 2002, for example, Abigail Johnson of Fidelity Investments purchased a home for about $9 million, and no boom ensued, although the economic outlook at that time was more uncertain.
There are no easy answers to explain Nantucket's phenomenal run, but the numbers are indisputable. In the spring, sales were so slow, Ranney said, that he jokingly wondered whether 508, the area code that includes Nantucket, had been disconnected.
But then in the summer, it was as if a switch had been thrown. September set a monthly record, with $123.9 million in sales recorded on 94 transactions, up from $47.9 million on 50 transactions in September 2002, Ranney said. In October, the monthly record was broken again. This time, sales were $151.6 million on 107 transactions, up from $70.9 million on 63 transactions in October 2002. Sales were $48.6 million in November 2003 on 50 transactions, up from $34 million on 32 transactions in November 2002.
In theory, factors such as rising consumer confidence should be driving sales not just on Nantucket, but also in other luxury resort areas. That doesn't seem to be the case. Realtor Foregger does business in Stowe, Vt., and on St. Bart's, an island in the West Indies, and he tracks trends in ultra high-end markets. Nantucket's recent surge may be unique, he said.
Scarcity may be a big part of the recent Nantucket boom. Already about 40 percent of the island is is under conservation. And, in theory, a tax on most real estate transactions makes it possible to put more land under conservation every year.
One recent buyer is Linda J. Groves, a partner with the Boston law firm of Bingham McCutchen LLP. After several years of looking for a vacation home, she purchased a place on Nantucket in mid-2002. Groves said that she was partly looking for a rental investment and that the home was already booked for the summer when she bought it. Three months later, one of the renters "made me an offer I couldn't refuse," she said, adding, "I had not used the house for a single day." Groves said she cleared just over $100,000 on her investment. The new owners paid $835,000 for the house in September 2002. This year, they were offered $1.2 million, but turned it down, Foregger said.
Donato, the owner of Sconset Market, had a similar experience. Early this year, he bought a cottage for about $500,000 that he planned to use as a rental investment. "I had already booked rentals for the entire summer," he said. "Then I got an offer I couldn't turn down." He netted about $100,000.
Rents on Nantucket are now so high that with the lower mortgage rates, a home can make an excellent investment, he said. Rents moderated somewhat this year, but many properties that rented for about $3,500 a week during the peak summer months in 1998 rented for $5,500 to $7,000 during the comparable weeks last summer, Foregger said.
Demand is partly fueled by new golf and yacht clubs that are making Nantucket more attractive to the international corporate crowd. Given the limits of shoreline geography, Great Harbor Yacht Club could be the last built on Nantucket. In mid-June, it began selling memberships at $225,000 apiece even though it won't be fully operational until 2006. Its capacity is about 400 members. As of last month, 234 memberships had been bought.
"It's entirely possible," said club president Gary McCarthy, "that by the end of next summer the club will be booked."
Chris Reidy can be reached at email@example.com.
© Copyright 2003 Globe Newspaper Company.