WHAT A DIFFERENCE A YEAR MAKES!
As we reflect on the 2022 Nantucket Real Estate Market statistics, it truly shows what a difference a year makes.
2022 was the third-best year in Nantucket real estate sales history, with $1.6 billion in sales from 432 transactions. In comparison, 2021, the best year ever, had record sales of $2.325 billion from 738 transactions. That year saw an increase of 25.5% in sales vs the prior year, 2020, and 133% increase vs. 2019 due to solid demand and limited supply.
Rising Home Appreciation also played a factor in making 2022 a particularly profitable year for the seller.
As shown above, the number of sales in 2022 was more in line with pre-pandemic 2019, but buyers were paying much more due to the home appreciation rise and the lack of competition caused by lower-than-normal available inventory.
INFLATION, INTEREST RATES, & TIME ON MARKET
In 2022, we experienced record high inflation, the fiscal policy problem of the Fed, record government spending, and rising interest rates which caused the stock market to retreat. Real estate inventories were constrained, and so properties sold faster. With an average of 2 months on the market & 5 months to sale, buyers were racing to close as interest rates rose.
STOCK MARKET vs REAL ESTATE MARKET
As the value of investment portfolios declined, investors were impacted psychologically. Fortunately, we started 2022 in a position of strength and the US still had a tight labor market. But by the end of 2022 the S&P was down 19%, the Dow down 9%, and the Nasdaq tumbled 33%. As often occurs, Nantucket’s real estate market followed that trend with the number of Sales Transactions being down 44% and the total Sales Dollar was off by 30%.
2023 OUTLOOK
I believe that the volatility and downward trend of 2022 will continue for a bit. We know we still have an inventory problem, and supply constraints will likely continue. We see that inflation is cooling and moving in the right direction, but it needs to be faster if it is to effect quarter one or two in the real estate world.
Uncertainty, ongoing inflation, supply chain issues, negative sentiment, talks of a mild recession and looming US Debt ceiling limit of $31.4 trillion are causing some to pause their property plans.
Before you do so, however, know that Nantucket has some headwinds and is less adversely affected because it is a luxury second home market. I expect to see some price softening, and properties may take more time to sell, but by no means am I doom and gloom.
Affordability will continue to be a big problem for first-time homebuyers on Nantucket. Home values began their most precipitous increase in October 2021 when interest rates bottomed out. Rapidly increasing rates have had the opposite impact. High-interest rates, high prices, and lack of inventory under $1.3M have already priced this group out of the market. Unfortunately, this will not get better anytime soon.
In the $2M-$6M price range, once inflation is under control and the economy stabilizes, interest rates will fall, which may lead to a potential recovery in the second half of 2023 and influence the buyer's attitude. If buyers continue holding onto their money, sellers may pull their homes from the market or settle for less. Sellers should pay close attention to market conditions to achieve optimal results.
SUMMARY
The Nantucket buyer demographic is well-healed and resilient. The desire for a Nantucket lifestyle is in strong demand, and if supply remains limited, the values will hold. I am optimistic about 2023.
The unique, iconic aura of the island makes it the chosen destination… the place to be. With so much to experience, and some of the lowest property taxes in the state, Nantucket has proven to be a safe investment providing a robust return over time.
The biggest problem is availability (supply).
These are the strengths that we have developed and instilled in our team for four decades as Nantucket residents, community leaders, and leading professionals in island real estate here at Berkshire Hathaway HomeServices Island Properties – We are proud of this group of professionals for its principles and its continued high performance.
If you are considering buying or selling a property and would like to discuss timing and market conditions, please give us a call to arrange a confidential discussion and find out how to achieve the most timely and profitable results.
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