With the level of appreciation we experienced this past year, will we see some type of softening in the 2021 real estate market? The experts are saying that won’t be the case. It looks like there will be continued demand and high prices being paid for Vineyard properties.
The following is a five year sales comparison for Vineyard properties. We saw a 40% increase in the number of sales and a 31% rise in the median selling price in 2020! While I don’t think this will repeat itself, I do think we will continue to see appreciation in 2021.
2020 had a 40% Increase in Sales and 31% rise in Median Selling Price
Philip A. White Jr., President and CEO of Sotheby’s International Realty, responded to the question of what we can expect in 2021. He said, “What the pandemic has taught the entire world is that much of the workforce can work from more places than we thought. Businesses are continuing to operate with a completely virtual workforce. People are going to be working from homes in areas that were previously considered ‘second home’ markets. It’s going to be their primary home for now, and I think the luxury buyer will continue to prioritize lifestyle in make decisions”. When asked if he expects luxury buyers to gravitate toward any specific cities or regions in 2021, his response was “Any of these second-home markets that are doing well, you have buyers from nearby who want a home they don’t have to take an airplane to get to. In Aspen, some of the bigger transactions were people from Denver, and in Martha’s Vineyard, a lot of those buyers are Boston-based and can take a ferry. It’s not a hard-and-fast rule, but drivability is noteworthy.”
In addition to the national outlook, the Vineyard has two unique characteristics that add to the continued demand and rise in sale prices. The fact that it’s an Island creates the issue of true limited inventory, as there is no option to buy something for a little less, “further out” from the prime areas.
Secondly, the huge rental demand that we’ve experienced for decades allows people to feel confident that purchasing here is always going to be a solid investment. So, while someone may feel that they could be over paying, they know they can rely on the rental income even if the market does flatten over the next several years. During the last recession our rental prices actually went up due to less sales, as that caused less properties to be introduced to the rental market. This decrease in supply drove up rental prices. As the sales market has recovered, we’ve actually seen owners needing to slightly reduce rates in weeks of lower demand. Of course, now that we’ve had the huge spike in people being able to work from home and such little available for sale, the rental market can’t keep up with demand either. We are seeing many people wanting to rent for the entire season, rather than just a week or two.
We most likely won’t see the massive appreciation we experienced during 2020, since so much of that felt like the result of people panicked about their current living situations and locations. And while we are still seeing a huge demand from buyers, there doesn’t seem to be as much of a frenzied feeling to it. But, appreciation has continued to rise over the last several years (see Ten Year Price Index below) and I think we can at least expect that to continue. With so many companies seeing the success of employees working from home, it only makes sense that this will play into the continued higher than normal level of demand for the Vineyard.
Ten Year Vineyard Appreciation Rate
