Trending Higher

Despite the recession fears, I think the Nantucket real estate market will continue to experience strong demand and prices will rise as people rotate out of volatile financial assets and into hard assets – especially A+ assets. If inflation rises, which seems likely, this will push real estate prices higher making for a good hedge against inflation. Also, real estate prices and gold are loosely correlated and gold is at an all time high…

We’re on track for the second biggest year in history.

Time Will Tell

Will the meltdown and volatility of the stock markets help or hurt Nantucket real estate? On the one hand, people who are in the stock market have less money, but on the other hand, people might flee the stock market for safer, more stable asset classes, the main one being real estate. Also, the meltdown and job layoffs will cool the economy, which will inspire the Fed to cut interest rates – another win for real estate. The wild card is what will the tariffs do. Overall, I think people will be moving their money to real estate, especially A+ real estate, i.e. Nantucket real estate, and, as a perk, they get to enjoy life on Nantucket.

Market is on track for its second best year, measured by dollar volume, ever and could easily become the best year ever.

Pre-Existing, Non-Conforming

The Nantucket Zoning Code was adopted in 1972. There are many properties built before 1972 that do not comply with the zoning code and have a pre-existing, non-conforming use. For instance, a property with a commercial use in a residential zone is an example of a pre-existing, non-conforming use – think the Ships Inn on Fair Street or the Wauwinet Inn on Wauwinet Road. Having a pre-existing, non-conforming use can add a windfall of value and is another piece of the Nantucket real estate puzzle. However, if the pre-existing, non-conforming use is abandoned for 3+ years, then it becomes invalid.

I know it is only February, but the market is on pace to have its second biggest dollar volume year in history.

Mixed Bag

There’s a mixed bag of indicators for the Nantucket real estate market, but for the most part they point to another strong year. The main indicators that are trending opposite this are days on market (DOM), which is trending upwards, and number of transactions, which is more than last year, but less than the previous 11 years. The main indicator, median price, is up 16% year over year. What’s interesting is median price is up and transactions are down, which makes me think there is pent up demand for the right property, but there is still a constraint on supply, therefore pushing values up. The headwinds of interest rates are strong, but I think the strength of the equity markets is stronger and ’25 should be another healthy year. Keep in mind, every dollar made in the equity markets that’s put into the real estate market, leveraged at 70%, gives the consumer an additional $2.33 of purchasing power on top of the dollar. Happy New Year!

This is an interesting chart.

2024

In a few weeks, we’ll close the book on another healthy year. Days on market and inventory have ticked up a little, but still historically low. One big stat that caught my eye is the dollar volume in the pipeline right now, which is around $250mm, which is the highest it has ever been in December – here we come 2025!

So much to be thankful for living on Nantucket, even the subtle aspects like how many amazing sandwich shops there are – there are the staples like Something Natural and Henry’s Jr., but there are the newcomers like Born and Bread and Pip and Anchor – so good…

Happy holidays!!!

Puzzle

The Nantucket codes, rules and regulations are so dynamic, they make so many properties a puzzle, that if solved can unlock windfalls of both financial and lifestyle value. There are over 20 zoning districts, over 100 either allowed, not allowed, allowed with special permit, allowed as an accessory use and/or may be allowed in Formula Business Exclusion District uses – yes, you read that right, may or may not be allowed use in the Formula Business Exclusion District! Tie all that in with complying with the Historic District Commission, the Conservation Commission, Massachusetts Endangered Species Act, Health Department, Building Department, overlay districts, etc. and properties become more complicated than meets the eye. Having a deep understanding how all of this works solves the puzzle. I love puzzles.

Market remains healthy. 2024 is the eighth year in a row the market has passed the $1bn threshold for total volume. I have a feeling the trend will continue.

Two is good, Three is great

Auctions can be hit or miss. They create a sense of urgency, but when there is only one arms length active bidder, they fall flat. When there are two arms length active bidders, the bidders can get emotionally invested and it can get interesting. But, when there are three arms length active bidders, that means someone really wants it and will keep bidding until he/she gets it and possibly bid it beyond open market value. That’s what happened at a recent foreclosure auction at 3 Brewster Road. There were three arms length active bidders (the foreclosing entity is usually a bidder, but not arms length). It’s a very desirable property in Monomoy, so it attracted a lot of attention, which is also key for a successful auction. Bidder 1 eventually dropped out, Bidder 2 and 3 continued to go back and forth for several rounds with each incremental bid getting smaller and smaller until it got to $25k increments and Bidder 3 eventually outlasted Bidder 2 and won the auction for $12.25mm plus fees, which is a very healthy number.

Speaking of healthy, the market continues to fire…

Interesting Strategy

I have a client who owns several properties close together on Nantucket. He wants to buy his neighbor’s property. I looked into it and the neighbor said he would sell, but at a number we thought was far over market value. I said, “This property is worth more to you than most others, but you’re going to have to pay more than anticipated. If you pay this number, you will have set the latest comp in the neighborhood, which will essentially increase the value of your other properties. In the end, you will come out net positive and you’ll get the property”. To be continued…

Taxachusetts strikes again. Now, any leases booked with an owner who owns more than one short-term rental on Island will include an additional 3% Community Impact Fee on all rental income.

Punch List

Having built a few houses on Island, I’ve learned a few tricks of the trade, but up until we just finished building our current house, I hadn’t figured out how to get the contractor and subs to finish the elusive punch list in a timely manner. I think I figured it out, though. Drumroll… You tell your contractor that your kid is having his birthday party on a certain date and kids will be running all around the property, so the punch list has to get done. Party’s tomorrow and the last items on punch list are getting done today:-)

The market remains healthy. If a listing is priced appropriately, there’s a buyer for it.

Windfalls

Nantucket real estate values can have many windfalls – the zoning changed, the neighbor moved a house that was obstructing the view, the Land Bank bought the neighboring property, etc. But, homeowners should be aware of calmfalls, too, which if you are, can become windfalls. For example, the Conservation Commission (ConCom), which governs wetland regulations on Island (think EPA), voted to enact updated regulations which make building near a wetland more restrictive than presently, which will ultimately devalue properties within ConCom’s jurisdiction. However, if you freeze the current ConCom regulations by filing, and having approved, a plan with the ConCom before Jan. 1, you’ll make your property more valuable than the one that did not freeze the current regulations. No rest for the weary…

Market remains healthy.