Nantucket’s real estate market has a very real and identifiable emotional component.
While buyers use sound data to justify a purchase, many vacation home purchases are equally driven by emotions. As a result, there have been several recent examples where emotional momentum has created a domino effect in Nantucket real estates activity. We saw this in Town/Cliff in 2014, in Surfside during the 2015 market and we are presently witnessing it in ‘Sconset.
So what do we mean by domino effect?
Our examples suggest that one or two property sales will immediately spur additional sales within a similar price point and/or area. In some cases, one or two transactions seem to spur the entire market. Here’s how this happens: when a premium property trades, there are typically two or even three other interested buyers for that same property. The bidders who lost out on the property will often react emotionally and look to buy a similar property quickly in an effort not to miss out. It seems crazy to many that buyers would base a significant investment on FOMO (fear of missing out) but momentum can cause buyers to make quick emotional decisions. Momentum has been a very real part of the Nantucket real estate market in recent years and must be considered a factor for both buyers and sellers.
In 2014 the “hot areas” of the Island were Town, West of Town, Cliff and Brant Point. During 2014 we saw 23 transactions between $4 million and $ 6 million which accounted for $115 million of total dollar volume. Compare this to the sales for the same areas in 2015 when we saw just 13 transactions between $4 million and $6 million which totaled $63 million. This means that 2014 sales were nearly double the sales of 2015, yet inventory levels in each market were similar. Interestingly, we can pinpoint the real momentum of the 2014 market to July when the property at 5 North Liberty went under agreement in under 24 hours and triggered a flurry of five similar transactions in a short period of time.
In 2015 we saw this domino effect transition to Surfside when we saw 27 transactions totaling over $63 million for properties over $1 million, compared to 2014 when we saw just 12 transactions totaling $18 million. The dollar volume tripled and as a result, we saw the average price rise by 50%. The ‘domino’ sale that triggered this Surfside momentum was 2 Nonantum Avenue. After that transaction, there was a flurry of buying activity in Surfside, an area that has generally traded at a relative discount to other beach communities.
This brings us to why the timing of this blog is pertinent…
While we are in what are typically the slowest three months of the sales year, we are seeing a tremendous amount of momentum in yet another area: ‘Sconset. The last two sales years, 2014 and 2015, represented among the slowest years in recent history for ‘Sconset with only $50 million in dollar volume each year. For perspective, in 2013, a much slower year as compared to the overall market, ‘Sconset sales volume totaled $86 million. As of mid-March, there is already $24 million of real estate under agreement or sold in ‘Sconset, an area that is typically sleepy until Daffodil Weekend. Yet, at this year’s pace, we may be out of inventory in ‘Sconset by September! The sale that seemed to trigger this recent domino effect was the sale of 36 Baxter Road, which was on the market for 18 months and brokered by Fisher’s Jen Shalley.
‘Sconset likely won’t be the only area that seems momentum this year. I expect the island-wide product of new inventory between $5 million and $8 million will have a resurgence this year and the inventory of in-between beach communities like Hummock Pond Road should see a surge. Only time will tell though and it is important to keep your finger on the pulse!