High Demand Raises Cost of Second Homes
By STEVE BERGSMAN
From Barron’s
July 01, 2004 — Nantucket is an island in transition — from one mogul to the next. Just ask Pepper Frazier, the proprietor of J Pepper Frazier Realty, whose own block in tiny Monomoy recently welcomed two new part-time neighbors. On one side, a Wall Street honcho shelled out $11 million for his vacation getaway. On the other, an old IBM hand named Lou Gerstner paid $12 million for a home on 1.6 acres.
A famous whaling center in the 1800s, Nantucket long has attracted captains. But today’s, mostly from Wall Street and industry, are paying more than ever before for second, third and even fourth homes on this speck of land off the Cape Cod coast. The local real-estate market “is the hottest I can remember,” says Frazier, a 25-year veteran of the scene. Some homes along the harbor in Brant Point and Monomoy are appreciating by 10% to 12% a month, he says. Even in less ritzy mid-island locales, values jumped about 40% last year.
If Nantucket and other A-list vacation spots are sizzling, many second-home markets across the U.S. are merely warm these days, due to the rocky economy of the past few years. But the temperature is rising from coast to coast, according to numerous brokers, as growing demand from affluent baby boomers overwhelms supply.
In the late 1990s, the baby-boom generation, 80 million strong, entered its peak earning years. “More and more, we see baby boomers ‘buying up’ for retirement and also purchasing second homes,” says Jim Gillespie, president and chief executive of Coldwell Banker Real Estate, a subsidiary of Cendant. “Generally, boomers have more wealth than previous generations. They have built up tremendous equity in their homes and are using inheritances left by their parents to purchase second and even third homes.”
