The state’s playgrounds gained national attention earlier this month when the National Association of Realtors released its 2019 US Vacation Home Counties Report, which labels those where 20 percent or more of the residences are seasonal or occasional-use homes as “vacation counties.” While resort communities in Florida, California, and the Carolinas may come to mind first, the report reveals that counties in Massachusetts, New Jersey, Colorado, Wisconsin, and Michigan have the highest percentage of vacation homes.
Nantucket and Martha’s Vineyard (Dukes County) have the largest percentage of vacation homes in the United States, each with 55.5 percent of their properties identified as second homes. Not far behind is Barnstable County at 41.2 percent.
“One reason that Nantucket and Martha’s Vineyard have such a large percentage of vacation homes is that they’re islands 30 miles out to sea,” said David Callahan, broker/owner of Jordan Real Estate in Nantucket. “It’s not really fair to compare them to Palm Beach County in Florida or to East Hampton (N.Y.), because those are resort areas with a larger geographical reach that spread inland where there are more permanent residents.”
That said, Nantucket and Martha’s Vineyard are sought-after vacation home destinations. The median sales price for a single-family home on Nantucket in 2018 was $1.49 million, according to Tim Warren, CEO of The Warren Group, a real estate and financial data analytics firm. Median sales prices on the island rose 40 percent between 2013 and 2018, Warren said.
In Dukes County, the median sales price for a single-family home was $736,250 in 2018, an increase of 19 percent over 2013, according to Warren.
In Barnstable County, the median sales price for a single-family home was $399,900 in 2018, an increase of 19 percent over 2013, according to Warren.
“I would also note that while Nantucket has done well in recent years, it still lags behind the median price achieved before the recession,” Warren said. “In 2007, the median hit $1,650,000, around 10 percent more than last year.”
According to the NAR, the median sales price for vacation homes nationwide rose by 36 percent between 2013 and 2018, higher than the 31 percent median sales price increase for all homes during the same period.
Cape and Islands appeal
Most vacation home buyers on Nantucket come from the Northeast, Callahan said — from New Jersey to Massachusetts. Buyers from Massachusetts predominate, but the introduction of ferry service from New York and more flights means more New Yorkers are buying there, too, he said.
“You can buy real estate a little cheaper on the Cape than on Nantucket, but the big draw of Nantucket is the lifestyle,” Callahan said. “It’s more difficult to get to and costs more money to be here, but that also provides a sense of safety. People feel like they can let their kids roam freer here.”
People in the entertainment industry and the arts tend to buy on Martha’s Vineyard, he said, while CEOs and CFOs are attracted to Nantucket. “The celebrities on Nantucket are mostly recognizable to people who watch CNBC.”
More than 50 percent of Nantucket’s land is held in conservation to prohibit development, but in the last decade or so, new yacht and swim clubs and a private golf course have attracted more people to the island, Callahan said.
Rising wealth and low mortgage rates
Increasing wealth has led to increased demand for vacation homes, according to Lawrence Yun, NAR chief economist.
Household net worth was at an all-time high of $100.3 trillion in 2018, nearly double the level in 2008, when it was cut during the recession, according to Yun.
Low mortgage rates have also contributed to increased demand for vacation homes, because many buyers finance their second-home purchase. Both Nantucket and Dukes counties are on the list of vacation counties with the highest share of loans for second homes. In each county, roughly 47 percent of new mortgage loans are for a second home.
Headwinds for vacation homes
A recession, if it occurs in the next few years, could slow price increases and the demand for vacation homes, Warren said.
“A declining stock market and a rising rate of unemployment would make consumers more defensive and cautious,” he said. “Vacation home purchases would be postponed, more desperate vacation homeowners would flood the market with listings, and prices would likely drop.”
On Nantucket, an antigrowth movement and debate on zoning continues to impact development, Callahan said.
“Land here is super-expensive, so the most common development is to tear down a 1980s house and rebuild,” he said. “I see a lot of construction workers and other people who provide services commuting on the ferries because they can’t afford to live here.”
Another potential issue is coastal flooding due to climate change, particularly in the harbor.
“Already boats stay in Hyannis during the big storms because of harbor flooding during a nor’easter,” he said. “But we’ll be OK if we start planning for this sooner rather than later.”
Some houses have already been moved, and groups are working to battle erosion on the eastern and western ends of the island.
So far, though, the vacation home market appears to be strong.
“Absent economic changes or challenges to the world order or our democratic process, the real estate market should keep chugging upward,” Warren said.