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S U M M E R We had wonderful weather in June as we headed into the high season. The big story so far this summer is the universal lack of supply and the very high demand. Whether it is getting ferry or dinner reservations, tee times or finding the perfect rental house at the last minute or that specific gelato at the Stop & Shop, be prepared to be patient and flexible. This also applies to navigating on, off and around the island. It seems that there has been a post-pandemic bump in activity on Nantucket which threatens to fray people’s patience before we even get to August. Perhaps it is because people have been confined for so long and are unable to travel to Europe? Adding to the challenges are those of staffing for many local businesses. We came out of the COVID restrictions much faster than anticipated in Massachusetts, leaving business owners scrambling to hire workers for this summer. As a result, many restaurants and shops are operating on a more limited schedule than in the past. According to the amount of water consumed (tracked by Wannacomet Water Company) there may have been close to 100,000 people on Nantucket at the beginning of July. And this does not include properties on private wells. It helps to remember that there are a lot of people enjoying the island this season. The real estate market continues to outpace expectations. Comparing the first two quarters of this year to 2020 is, of course, skewed by the onset of the pandemic in March of last year when the market came to a rapid standstill on Nantucket. In spite of this, by the end of Q2 this year the total number of property sales are up 158% compared to last year. The dollars represented by these sales are up 169%. In 2020 total sales dollars were $1.895 billion, compared to $1.018 billion in 2019. Halfway through this year we are already at nearly $884 million and the majority of sales close in the last half of each calendar year. Continued on Page 2...
Nantucket House and Lot Prices As of Q2 2021
MARKET NEWS, (continued from page 1) This year the second quarter saw $533 million in transfers compared to $143 million in 2020 and $151 million in 2019. It is, perhaps, more instructive to compare this year's numbers to the pre-pandemic year of 2019. In that case the second quarter is up 72%. The average price of a property selling on Nantucket is $2,496,000. The average selling price of a house is $2,854,000; the median price is $2,375,000. Vacant land is selling, on average, for $1,233,000; the median price of land is $1,050,000. A significant factor in our market is that the average time listed for all sales is down to 7 months, the lowest it has been in the past 14 years. Last year it was 9 months. This is no surprise to agents who are actively listing and selling property. When a new listing comes on the market, it often generates interest from multiple qualified buyers and sells for full price or more. Those buyers that do not need financing and who are either on-island or can get here quickly, are at an enormous advantage. Properties are currently selling for an average of 93% of the list price and for 169% of the assessed value at the time of sale, much higher than it was one year ago. The properties in the highest demand are ones that have some privacy, are in updated or excellent condition and have a high level of amenities such as a swimming pool and ample outdoor spaces for living and entertaining. There were 25 sales of commercial property already this year compared to 17 for the entirety of 2020. This clearly indicates that business owners have confidence in the economic future of Nantucket. Once again, this is being driven by a function of supply and demand boosted by consumer confidence. Long- and short-term interest business owners. On Nantucket now it feels very much as it museums are open, beaches are the water again. We can, once again, please be aware that some businesses covering and physical separation. Hope to
did in 2019 - restaurants, shops and accessible, and people are getting out on hear live music and go to the movies. But may still have requirements for face see you on-island soon! Page 2
PROPERTY RIGHTS PROTECTED (for the moment) For the first time our Annual Town Meeting was held outside, under four large tents. It was a crisp and clear day with a breeze and the meeting started at 9 AM on June 5th and wrapped up 9 hours later. Madam Moderator, Sarah F. Alger, as usual, did an excellent job of controlling the meeting and moving it along so that it finished in one day. Also new this year were individual handheld electronic devices for voting which gave instant, and accurate results, saving a lot of time. For many of us it was the first time we had gathered in a large group in over a year. There were 922 people present to hear, discuss and vote on, the most controversial articles. Article 90, sponsored by ACK*Now, sought to limit, regulate and restrict short-term rentals. Unfortunately, the proponents inaccurately portrayed the owners of these properties as greedy corporate interests who do not care about Nantucket - simply not true. They also tried to promote that passage of the article would create more affordable housing for year-round residents, also untrue. The voters saw the article for what it was - an effort to control people's private property rights and dictate who gets to come to Nantucket - and voted it down by a wide margin of 625 to 297. Had it passed there would have been severe impacts to businesses that rely upon the shoulder seasons for income. Another article that had generated a lot of community interest was Article 97 which proposed to take 25% of the Land Bank revenue and divert it towards affordable housing. The article failed, also by a wide margin, confirming that the community feels that the Land Bank is doing a good job and that there are other means to fund affordable housing initiatives. In fact, the meeting voted over $16 million for affordable housing, which was affirmed by a subsequent ballot vote. Unfortunately, Article 38, which would have allocated some of the income from the Room Occupancy Tax for affordable housing, failed to garner the 2/3 needed to pass. This tax, currently 11.7%, is paid by visitors to Nantucket who stay in inns, hotels, and short-term rentals. The local portion of the tax is 6% and 5.7% goes to the state. Currently the money goes into the general fund of the Town of Nantucket. It seems to make a lot of sense to allocate some portion of this tax, paid by visitors, to help house our year-round population.
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Capital Gains Taxes
Affordable Housing Updates Consistent with national trends, the lower end of the market is moving very fast. In 2010 there were 22 single-family (non-restricted) residential sales under $500,000. In 2015 there were 12; in 2020 there were 3. Each community in Massachusetts must have 10% of it’s year-round housing stock designated as affordable under specific guidelines (called the Subsidized Housing Inventory or the SHI list) in order to remain in safe harbor from unfriendly 40B developments. Nantucket has recently reached 5.5%. The Town’s Affordable Housing Trust continues to work hard to create more affordable units and, at the same time, keep the community in safe harbor from unfriendly 40B developments. It is expected that nearly 30 units will be ready for occupancy in the next twelve months. The Trust has recently helped the Town achieve safe harbor for another year until June 2022. Habitat for Humanity on Nantucket has 11 existing homes onisland and is in the process of building 5 more units this year, two of which will count towards the SHI list.
As of July 1 there were only 10 single family residences for sale on Nantucket under $1,500,000.
When one sells a property, it triggers taxes on the gain. The gain is defined as the difference between the price paid, costs associated with the purchase (which include the Land Bank fee on Nantucket), some improvements and the selling price. To be exempt, the property must be considered as a primary residence based upon IRS rules. These rules require that you must have occupied the residence for at least two of the last five years. The current exemption is $500,000 for married people, filing jointly and $250,000 for single filers. Short term capital gains are taxed as ordinary income, with rates as high as 37% for high-income earners. Long-term capital gains rates are 0%, 15% or 20%, with rates applied according to a formula that includes income and tax filing status. There are ways to avoid or defer the gain which include converting an investment property into a primary residence, structuring an installment sale, or entering into a 1031 taxdeferred exchange. There are stringent rules surrounding each of these approaches so be sure to consult your tax professional for more details.
WHO REPRESENTS ONLY YOU? Prior to July of 2005 the majority of real estate agents in Massachusetts represented the Seller and not the Buyer in real estate transactions. Research determined that many buyers were not aware that their agent was actually working for the seller and, as a result, new agency laws were adopted permitting real estate offices to offer both Seller and Buyer agency. A critical piece of the law is that consumers must be informed about how agency works and then sign an Agency Disclosure Form, acknowledging that they understand who works for them and who does not. The law requires that the Agency Disclosure Form must be presented, discussed, and signed at the first personal meeting to discuss a particular piece of property with a Buyer or Seller client. The change in the law has, from a practical standpoint, made it much easier to meet fiduciary responsibilities to a client, whether it be a Buyer or a Seller. The full fiduciary duties under single agency are: obedience to lawful instruction, loyalty, disclosure of material facts, confidentiality, accounting of funds and property and reasonable care and due diligence. On Nantucket over 85% of all sales involve two offices: the listing office, representing the Seller, and the selling office, representing the Buyer. Agency is very clear in this scenario. However, it becomes more complicated if there is an in-house sale. If an office has the property listing and represents the Seller, they may elect to also represent the Buyer but only with informed written consent from both parties. This is called Disclosed Dual Agency and the agents in this case operate with a reduced level of fiduciary responsibility to each client. The agent may not advise either the Seller or the Buyer client. An alternative to Disclosed Dual Agency is to practice Designated Agency under Dual Agency which is what we do here at Atlantic East Nantucket Real Estate. In Designated Agency, only one agent represents the Seller (the listing agent). An appointing agent (the principal broker) appoints another agent to represent the Buyer, each as Designated Agents. We feel that we can do a better job for our clients under Designated Agency as opposed to Dual Agency. There are fewer potential conflicts and we can better protect the interests of our clients. Page 4
You Will Be Glad You Did This!
Residential Home Inspections
Attention rental homeowners! Create an inventory list or video of everything in your home. It will be very handy if you ever incur losses from a disaster or if some of your belongings go missing from your vacation home. This inventory will be a vital resource for swiftly settling a homeowner's insurance claim. What to include on your list? · Description of the item · Date & Purchase Price · Receipt · Make, model, or serial number · Replacement cost Video or photos of your contents are excellent means to record your possessions and ideal for further proof of ownership. Make sure to keep your inventory in a safe place.
When purchasing a home, we strongly recommend the buyer hire a licensed home inspector. We are very fortunate in the state of Massachusetts to have one of the strictest licensing requirements for home inspectors. Look for an ASHI (American Society of Home Inspectors) Certified Inspector for the most educated and up to date inspector. The inspection will be based on the observations made on the day of the inspection and are not a prediction of future conditions. The report will be a disclosure of material defects observed. The inspector will not give a price/estimate to remedy a defect or refer you to a professional to fix it. They will inspect over 387 items, but only if the areas/items are readily accessible & visible.
She Really Lived Here? Many of us have had the good fortune to live in an old house on Nantucket at some point. One of the best things about historic homes is the stories they tell. Maybe a whaling captain lived in the house who still pays an occasional visit? Perhaps there was a secret closet that was used as part of the Underground Railroad? Or have you always wondered what that odd looking structure in the yard is? Best of all – we have ways of finding out who lived there and what may have happened at the property. This is the fabric that connects us to our shared history. The Nantucket Preservation Trust (NPT) offers a service that explores and documents house histories on-island. They offer a variety of options including a Brief History, House Genealogy, the Comprehensive House History and the House History and Marker Combo. Please contact NantucketPreservation.org for more information. Page 5
NEW POOL RESTRICTIONS Article 48 at the Annual Town Meeting sought to further regulate residential swimming pools on smaller lots. The only resistance was raised by a member of the Finance Community who felt that owners who would be impacted by the changes were, perhaps, not given enough notice. The article handily secured enough votes to pass. In summary: In the R-1, SR-1, R-5, and R-5L districts only, the following criteria must be met: (1) a minimum lot area of 7,500 square feet is required, and (2) side and rear yard setbacks of 10 feet shall apply to the residential swimming pool and associated mechanical equipment. This requirement shall apply to residential swimming pools for which a building permit is issued after September 30, 2021. It remains to be seen how many new applications for permits in the affected zoning districts will be submitted before September 30, 2021. If you think your property may be impacted, please contact your agent for more information.
Atlantic East N A N T U C K E T R E A L E S TAT E Penny Dey, GRI, ABRM and Heidi Drew, ABR, RSPS, SRS, Broker/Owners Ken Beaugrand; Linda Bellevue, GRI, CBR; Peter DuPont; Alison K. Forsgren, ePro, NAR Green, SRES Mary D. Malavase, ABR, RSPS, TRC, SFR, SRS; Jane Miller, ABR, RSPS; Erikka Perkins; Meg Ruley, ABR, RSPS; Lisa Sherburne, ABR, RSPS; Melinda Vallett; Geri Walker, RSPS, SFR; Christine Whelden, ABR; Tanya Babaitsava, Office Manager We believe in doing one thing and in doing it well! 82 Easton Street Nantucket MA 02554 508.228.7707 NantucketRealEstate.com
Volume XVII, Issue 3, Summer 2021