Housing Market Drives Population Changes, Economy

Posted in: Region
Nov 8, 2007 - 8:36:03 AM
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     Vacation properties and second homes have accounted for more than half of the single-family home sales market on Cape Cod in 2007, while first-time homebuyers and families with children at home created only a small portion of the housing market, according to the results of an October survey of local realtors.
     The realtor’s-eye view of the housing market, including data on who is buying, who is selling, and why, as well as open-ended written comments, in many cases supports the warnings about the population balance of the Cape presented last month at a Cape Cod Chamber of Commerce-sponsored economic summit.
     A demographer hired by the chamber of commerce to study population trends on the Cape, Peter Francese, told the more than 300 people in attendance at the summit that Cape towns need to attract more young families and workers to support the economy, and in order to do so the towns need to provide workforce housing for those 20- and 30-somethings and their families.
     Several local and regional economic and business experts, along with Mr. Francese, have begun to stress recently the importance of the housing market not just because of what it means to individual property owners but also because of its profound influence on the local economy, the strength of the school systems, and municipal budgets.
     The realtor survey, however, which includes responses from more than 229 members of the Cape and Islands Association of Realtors accounting for almost a third of single-family home sales this year, shows that in 2007 the Cape has been moving in the opposite direction.
     Just 43 percent of homes purchased so far in 2007 were bought as primary residences, according to the survey, while about two-thirds of the approximately 155,000 housing units on the Cape are currently occupied year-round.
     Half of the units sold were bought as vacation or retirement homes and seven percent were purchased as an investment.
     About 20 percent of households now include children, according to information provided by Mr. Francese from the US Census Bureau. But less than 12 percent of the homes purchased in 2007 have children living at home, according to the realtor survey. A more balanced percentage of households with children is 25, Mr. Francese said.
     Of the homes bought in 2007, 38 percent include full-time workers, according to the survey.
     First-time buyers represented 13 percent of the sales reported in the survey.
     “First-time homebuyers are practically non-existent. When I first started selling real estate, that market was at least 50 percent of my business, but unfortunately no longer,” a realtor from Cape Cod Associates Real Estate said in response to a survey question on changes in homebuyers over the past five years.
     Many of the survey comments indicate that people, especially young families, are leaving the Cape because they cannot afford to live here, a sense that is in part borne out by the list of most common reasons for selling, which included financial issues, as well as a desire for a larger home, retirement, and family issues.
     With the approximately 20 percent of sellers “moving up” in the housing market into a larger, more expensive house, William Zammer Jr., vice chairman of the Cape Cod Chamber of Commerce, predicted a possible “domino effect.” As families trade up in the market, it will open lower-priced homes, he said.
     However, contradictory to the stereotype of an impossibly expensive housing market on the Cape, Mr. Zammer and James Regan, president-elect of the Cape and Islands Association of Realtors, each said that because of trading up and other reasons such as the increasing prevalence of 40B developments, there are now more homes available for around $300,000 than there were a few years ago.
     Mr. Regan said there are more houses today in the $200,000 range than there were three years ago, when homes under $300,000 were difficult to find.
     Mr. Zammer and Mr. Regan, both of whom live in Mashpee and have strong business ties to the Upper Cape, said in separate interviews that there are more affordable homes available, but the properties often need considerable work and renovation.
     However, both men also noted that many of the young families looking to buy are not interested in the traditional “fixer uppers,” another impression supported by comments and data in the realtor survey.
     “They want turn-key move in condition. They want recent upgrades, not just excellent condition. They don’t want to have any work to do on the property. They want to receive a ‘deal’ on the price of the home. They seem less invested in a particular home and more interested in a good value. They aren’t afraid to walk away from a seller who won’t compromise on price or repairs. They are willing to wait until the right thing comes along; there is less urgency on their part,” according to an anonymous comment included in the survey.
     More than half of the total sales reported in the survey were between $250,000 and $450,000, and the $250,000 to $450,000 bracket represented about one-fifth of the sales.
     Less than five percent of the sales included in the survey were for $1.3 million or more.
     The median price of property sold in October was $345,000, down 7.6 percent when compared to October 2006, according to data compiled by the Barnstable County Registry of Deeds. Since January, the median price is down 6.1 percent.
     The survey comments are far from uniform and are at times contradictory, but the predominant sense about the nature of homebuyers is that there are fewer young families, buyers are more careful to ensure they are getting a “deal,” there are fewer families looking to move up in the housing market, and, because of the slower market, there are fewer investors or builders looking to “flip” the property to make money.
     Another representative comment notes that while buyers used to look for “sandy streets” with smaller houses, they now want paved roads, technology-ready houses, and water views.
     “I find that I am working with mostly second home buyers. I do find that buyers are much more aware of market trends and prices due to the Internet access buyers have. I do feel that with the prices coming down it will open up the market to first time home buyers and the year round residents that couldn’t afford to buy in the recent past,” another anonymous realtor noted.
     Both Mr. Zammer and Mr. Regan said the Cape is an extraordinarily attractive place to live, with a high quality of life, but with that come sacrifices such as a high cost of living. “It is a privilege to live here,” Mr. Regan said.
     As for the market itself, 2007 has been an up and down year. While there were 22 consecutive months of declining sales figures in 2005 and 2006 when each month is compared to the previous year, January 2007 saw the first up tick in almost two years. But February and March 2007 were down again and April and May were back up, a skittish trend that continued throughout the first 10 months of the year.
     “There are other parts of the country that have pneumonia whereas maybe we have a cold,” Mr. Regan said, citing the problems in the mortgage industry brought on by subprime loans. “The market here is going to rebound a lot faster.”
     For many involved in economic development on the Cape, housing has taken on a new importance. The issue has evolved beyond the focus on “affordable housing,” as strictly defined by state regulations, to include “workforce housing” as well. Mr. Zammer said the demographic situation calls for a focus on workforce housing, with single-family homes around $300,000.
     Lois R. Andre, director of the Workforce Resource Center and the Cotton Center for Real Estate Studies at Cape Cod Community College, said the housing is interconnected with the other major demographic, economic, and social issues facing the Cape. Public officials and chambers of commerce have done well to promote the Cape as a top tourist destination. Now they need to help turn the Cape into a top place to start a business, find a job, raise a family, and live, she said.
     Given the importance of the issue, both Mr. Regan and Mr. Zammer pledged to continue to push elected officials and the public to realize the problem and counteract it.
     Mr. Zammer said the chamber is working on bringing Mr. Francese back to speak with boards of selectmen and town managers, and Mr. Regan said the realtors association will now regularly be keeping closer track of demographics and trends in who is buying and selling homes.
     “If we don’t do anything and let things get worse, it is going to be more challenging to deal with in the future,” Mr. Regan said.