About Nantucket
Nantucket is a town, a county, and an island destination resort located 21 miles south of Cape Cod, 91 air miles south of Boston, and 207 air miles east of New York City, in the Commonwealth of Massachusetts off the east coast of the United States. Some 14 miles long and 3 1/2 miles wide, the island has a perimeter of 55 miles of sandy beaches facing the Atlantic Ocean on the south and east and Nantucket Sound on the north and west. Though losing about six acres per year from shoreline erosion, particularly along the south and east shorelines, the island’s total area is about 50 square miles, or 30,000 acres. It has been predicted that a warming atmosphere and rising ocean levels may cause the island to disappear in 700 years.
The official year-round population, according to the Town Clerk, on June 10, 2005, was 10,610, up from 6,012 in 1990 - a growth rate of over five percent annually - and up from 5,087 in 1980. The 2010 Census is expected to find over 12,000 residents. 55% of the 7,712 registered voters participated in the January 19, 2010, Special Senatorial Election. During the three-month summer season the number of people on the island swells to over 50,000 on any given day. The Nantucket school system includes grades K through 12, with an enrollment in January 2010 of 1,150 students. Each high school class for the foreseeable future will include between 80 and 100 or more students. In managing the harbor, a popular destination resort for recreational boating, the Marine Department issued 2,141 mooring permits for small boats.
In the twelve months ending in June 2008, there were 182 births, 175 marriages, and 67 deaths on the island . 19 swimming pool licenses, 2,036 small boat mooring permits, and 169 commercial scalloping licenses were issued. From Nantucket’s sole source aquifer, the Wannacomet Water Company pumped 598 million gallons, 5% more than the previous year. At the end of 2006 there were an estimated 22,000 autos registered on the island. Median annual family income for Nantucket residents for 2000 was estimated at $55,522 by the 2000 US Census and at $42,393 by the Bureau of Economic Analysis . That is up from $40,331 in 1990 and was the second highest in the state, after Sandwich on Cape Cod. The median income according to HUD for 2007 was $81,800.
Travel to and from the island is by boat from Hyannis, or airplane from Hyannis, New Bedford, Boston, or New York. Nantucket’s Memorial Airport is second in New England in the number of flights, with an estimated total of 261,000 passengers departing in 2007, well below the 302,161 in the year 2000. In the year 2009, the Woods Hole, Martha’s Vineyard, and Nantucket Steamship Authority, created in the early 1960s as the island’s lifeline, transported some 513,600 passengers to and from America to Nantucket. 67,200 cars and 38,000 trucks were carried between Hyannis and Nantucket. These figures were off about 6.8% compared to 2008. The privately operated Hy-Line, licensed by the Steamship Authority, carried some 360,000 passengers roundtrip from Hyannis in 2009.
During the “palmy days” from 1750 to 1850, Nantucket was the whaling capital of the world, with her locally-built sturdy whale ships and crews representing the first Americans traveling far into the Pacific Ocean in search of spermaceti. With their successful voyages, the island became the second richest community in New England. But after the discovery of petroleum in Pennsylvania, Nantucket’s Great Fire of 1846, the development of rail transportation to New Bedford, and the 1849 gold rush, Nantucket’s whale fishery declined rapidly. The islanders gradually encouraged the summer visitor and tourist trade, and along with construction of new homes, this is the leading industry today.
A real estate boom began in the mid-1960s and continued through 1989 before correcting severely during the savings and loan crisis, with the average home value dropping about 35% and the average vacant lot declining 50% over four years. The bottom was reached in 1992-93 and the market improved until 2000, a year that finished as the most successful in Nantucket‘s history, followed by 2003 and then came the blockbuster year of 2004, which broke through a billion dollars for the first time. In 2005 the billion dollar figure was again exceeded, though some $137 million represented commercial properties. The market began slowing in 2006 and has continued a downtrend. The national “sub-prime” mortgage problems and declining stock prices are having an increasingly direct effect on Nantucket.
New construction averaged over 200 houses per year until the slowdown started in 2006, providing a high level of income and steady year-round employment in the construction trades. In 2005 there were 212 permits issued, including 19 for the Sherburne Commons assisted-living project, which has lately encountered financial difficulties. In 2007 the annual rate was slower than in recent years, at 127. The construction slowdown continued in 2008, with just 64 new homes, the lowest number since building permits were first required in 1972. In 2009 the rate was less than last year, with only 44 permits issued. An estimated 5 permits have been issued in 2010.
According to a recent Planning Board study, there are more than 8,000 homes and another 1,200 secondary dwellings on the island. With existing approved lots, there appears to be potential for at least another 7,000 or more primary homes on the island, and possibly an additional 8,000 second dwellings. While it is unlikely that all of those houses will actually be constructed, it would seem that unless the economy rebounds and residential construction resumes, extreme “buildout” on finite Nantucket will not occur for another 50 years or more.
The island’s isolation and high freight rates have contributed to “The Nantucket Factor”, a cost of construction that is perhaps 35% higher than in most other places in America. Depending on quality, per square foot costs range from a low of $95 to a high of over $500, according to local contractors and insurance adjusters. We are now estimating standard “no frills” construction at a bare minimum of $300 per foot. Modular homes can be finished faster and for about three-quarters of that figure.
According to a June 2002 study for the Nantucket Planning and Economic Development Commission, the cost of living on Nantucket is higher than on Cape Cod, measured by cost of gasoline (+40%), retail rents (up to 150%), groceries (8% to 25%), electricity (base rate +55%), and heating oil (+48%). However, until the recent recession started, our unemployment rate hovered below 2% for most of each year.
Property taxes in Nantucket County continue to be the third lowest in Massachusetts. The assessed valuation for the entire island as of January 1, 1994, was $3.036 billion, rising to the latest figure as of January 1, 2008, of $25.67 billion, third highest in Massachusetts. The mil rate for residential property is $2.76 for fiscal 2009. The commercial tax rate this year is $4.77, and a separate open space rate is $2.56.
The source of property tax revenues, and a graphic indication that of some 17,467 total taxable Nantucket properties, 89% are owned by off-island taxpayers, is shown below.
Nantucket land and property values escalated rapidly until 1989, with appreciation rates sometimes exceeding 15% per year for homes and 25% per year for vacant land. As shown in the chart below, the average price for a buildable lot peaked at $226,000 in 1989, then declined to $123,000 as of the end of 1993, down 50% in four years, with a monthly low that year of $109,000. The average vacant lot sale in 2006 was up 94% and the median was up 52%! Although the number of remaining vacant lots is dwindling, that very strong trend has proved unsustainable in the current economic climate. In 2008 the average lot was down 36%, while the median lost 20%. Only 35 vacant lots were sold so far in 2009, at an average price of $812,000, down 48% from last year. To date in 2010, just 3 vacant lots have transferred.
The average dwelling sale price rose steeply after 1980, peaked in 1989 at $504,000, then declined about 35% into 1993. In 2002 home prices declined as shown above, but were rising since July of 2003 and finished at a record average sale price of $2,438,000 in 2006. In 2009, the number of transactions barely topped 2008, and was the lowest since 1985. At $445 million, the dollar total was off 22%. Though the market may now be improving gradually, the effects of the international economic slowdown have clearly come home to Nantucket.
Due to the unique consideration that Nantucket properties are almost 89% owned by non-resident taxpayers, who may have affiliations or interests in Wall Street, we can see some correlation to the Dow Jones Industrial Average.
Between 1988 and 1990 volume also declined, a factor stemming from the 1987 stock market crash, higher interest rates, the 1986 “Tax Reform Act” that had a disastrous effect on real estate values, and a general recession in the northeastern United States. Although foreclosures represented 7% of the market for 1992 and 2% in 1993, that is below the 11% seen in 1990 and 1991. This year foreclosures represent about 6% of home sales.
The rate of Planning Board approval of new subdivision lots has been as follows, with 102 new residential building lots created in fiscal 2003, 37 in 2004, and 100 in 2005. There were 116 new residential lots created in 2008.
Average time on the market for all listings as of February 28, 2010 was 16 months, while average sale price as a percent of listing price is estimated at 73%. Sales are taking place at 95% of the January 1, 2008, (most recent) assessed values, on average.
Contributing to values on the island is a strong interest in and community support for conservation of the remaining open lands. Since the early 1960s, groups such as the non-profit 1,800 member Nantucket Conservation Foundation (NCF), the Trustees of Reservations, and the Massachusetts Audubon Society, have collectively purchased or been gifted nearly 40% of the island. NCF owns some 8,450 acres (28% of the Island), the Trustees some 921 acres, and Audubon about 874 acres.
In addition, the Nantucket Islands Land Bank was created by the state legislature in 1983 for the purpose of taxing each Nantucket County real estate transfer and using the funds to purchase land in the public interest. It is operated by a five-member publicly-elected commission. Commission records, which must be completed by buyers and sellers under penalty of perjury and a 2% tax paid prior to transferring title in the Registry, provide an accurate record of real estate transfers. A transfer cannot be recorded in the Registry of Deeds without prior Land Bank approval.
According to IRS, the Land Bank tax represents, not a deductible sales tax but an increase in the cost of purchase. The Land Bank has acquired some 2,200 acres of land (6% of the Island), at a cost far exceeding $100 million. About $20 million was collected through this fee in each of 2004 and 2005. Recently receipts have declined with the slower market.
Nantucket is a desirable destination resort for the millions of people living in the eastern quarter of the United States, many of whom will continue to support this real estate market. Relatively fast population growth over the past few years has resulted from Nantucket providing a safe environment for raising children combined with our historic ubiquity, as well as modern computer and increasingly reliable and fast internet connections.
For more on our favorite subject (Nantucket!), please contact one of us, and you are always welcome to visit our web site at www.denby.com.
H. Flint Ranney Katherine Ranney Sayle Robert F. Ranney
Yolanda Fernandez
© 2010 Denby Real Estate, Inc
Add comment September 18th, 2009