Feeding Frenzy?

Low rates, low inventory, and the fear of Covid has churned up the Island’s housing market.

The headline was jaw-dropping: “Real Estate Market Surpasses $1 Billion in Sales for 2020,” the Vineyard Gazette announced. So, there it was. The pandemic-fueled real estate mania of 2020 in stark, first-of-its-kind numbers.

The year certainly didn’t herald a gold rush. It began, after all, in the dead of winter with a hint of a troubling global virus. By mid-March just about everything had shut down. In the damp, chilly weeks that followed, renters cancelled their reservations, either due to the state’s temporary ban on short-term rentals or simply the fear of getting here. The forecast looked dim, with some envisioning a quieter bygone summer of years past.

Yet June arrived and those abandoned rental weeks were quickly snatched up. Purchase inquiries began flooding into real estate offices, and by July it was an outright fire sale where cash was king.

“I’ve never seen anything like it,” said Stacy Ickes of Donnelly + Co. in Edgartown and a broker here for twenty-five years. “It very quickly turned into a huge frenzy. It really clicked in for me in July when I had a client who spent $200,000 over asking price and never stepped into the place.”

Brokers and agents were suddenly navigating a market that was more like Boston or San Francisco. There were bidding wars; cash offers came in at listing price or above, sometimes based solely on FaceTime or video tours; buyers dropped contingencies such as home inspections and appraisals; and some, looking to separate themselves from the crowd, penned heartfelt letters to the owners.

Where did that leave us at the close of 2020? In short, with big upswings in prices over the previous year and a dearth of inventory. The median cost of a single-family home jumped 31 percent to $1.15 million, and median land prices were up nearly 40 percent. According to an analysis by Sean Federowicz for Landmarks Real Estate in Vineyard Haven, residential sales reached 542 transactions, a 40 percent leap over 2019.

“These buyers had a mission,” said Judy Federowicz, principal and co-owner of Landmarks Real Estate. “When they knew the kids weren’t going back to school and everyone was working remotely, they knew they could be anywhere, and second-home communities like ours suddenly became a refuge. The normal days on the market was 274 days, and now it can be, like, twenty-four hours.”

Theresa Hatton, the CEO of the Massachusetts Association of Realtors, believes the current shift of looking at seasonal destinations more as a home base is here to stay, with workers looking for more flexibility post-Covid-19 and employers seeing an opportunity to reduce high-cost commercial office space.

“As long as broadband can support remote learning and working, the trend will continue,” she said. “Second-home owners came and stayed, and then their friends came. We’ve seen a lot of migration into Massachusetts vacation areas, and these are people looking for permanent residency, not just a second home.”

It’s not like Vineyard real estate was at some low end. In fact, the highest previous record was in 2017 when there were $670 million in sales, according to LINK, one of two multiple listing services for the Island. Inventory has been a problem for the last few years, but now brokers say it’s decimated, particularly below $1 million and in the sales-driving $1–$2 million range. As of this writing, there were just ninety-nine single-family homes listed for sale and twenty-one pieces of land.

So, what’s likely to stick after this unprecedented surge? Agents see virtual tours and DocuSign closings staying in the mix. As Alyssa Halisky, a managing broker at Wallace & Co./Sotheby’s in Edgartown, sees it, “It’s really what buyers are doing to make sure they don’t lose an opportunity given the lack of inventory.”

The legacy of 2020 also raised the bar for first-time buyers. Of the 526 single-family home sales in 2020, 231 were at $1 million or below, with 176 in the $1–$2 million range, according to LINK. As of this writing, only eleven residential properties were for sale below $1 million.

Jim Feiner of Feiner Real Estate, and a long-serving member of the Chilmark Housing Committee, says while establishing a housing bank and easing zoning restrictions would help address the problem, maybe it’s time to let Island buyers get first dibs on properties under $800,000 and avoid the bidding wars with vacationers or investors. To that end, he sent an email to fellow agents suggesting a thirty-day window for Islanders in the hunt for a home in that price range.

While Feiner and others may be game, agents contacted by the magazine did not view it as a feasible approach, citing sellers’ desire to secure the best price as well as existing fair-housing regulations that prohibit excluding anyone from the market.

Nonetheless, there is renewed energy both here and at the state house to establish a local housing bank that would be funded and governed much like the Martha’s Vineyard Land Bank. With details still very much in play, John Abrams, CEO and co-owner of South Mountain Company in West Tisbury, believes this moment may be the one that gets a percolating idea off the drafting table and onto town meeting floors and, eventually, to the state legislature.

“It might end up being a graduated tax paid by the buyer that excludes sales at a million or a million-and-half, say, but we’re in a powerful time where no one can deny the need,” he said. Currently, there are home-rule petitions pending in the legislature to establish a real estate transfer fee on high-end properties for Nantucket, Provincetown, Boston, Concord, Brookline, and Somerville.

In the meantime, agents expect buyers to continue hovering and watching for new listings, which are unlikely to suddenly grow and meet demand. As Ickes said, “The pandemic is not behind us, and I still feel we’ll have an active spring and summer market, but we need inventory. Are people going to want to sell? If there’s no inventory, it will come to a screeching halt.”

Added Judy Federowicz, “I know there are people thinking maybe this is the time to sell, and we may increase our inventory, but I don’t know how long a market can go on like this and not eventually burst. As a broker friend told a client recently, ‘I’ll sell you this house, but in two years don’t expect to get the same price.’”