THE RISING TIDE OF CAPE COD REAL ESTATE
By Karen White
Cape Cod Magazine - Spring 1999

Oh, for $12,000 in 1979! What that piddly amount of money would have bought! A beautiful piece of land, big enough for a big house, dry and firm, with guaranteed gorgeous pure Cape Cod sunsets and stunning sunrises.

Or, for just a few thousand more, a lot along the shore, a dream-come-true land of sands and endless horizons. If it were 1980 and a buyer had $50,000 burning a hole in his pocket, he could have his pick of move-in-tomorrow condition homes just a few steps from private beaches where seagulls hunt for crabs and cool early morning sand tickles the toes.

Ah, such wonderful thoughts! And oh, so far away! Those heady days of 1979 and 1980 might as well be the good old days of grandpa's memories, when you could go down to the Barnstable harbor docks and come home with a bucket of fresh mackerel for a quarter. Ain't none of those days coming back, not ever.

In the giddy mid-’80s, real estate was a monster that gobbled up thousands of properties and spit out high prices and grew and grew until it finally gorged itself to death. The early ’90s saw failures, foreclosures and forlorn homeowners trying desperately to sell their devalued properties without taking too much of a loss. Things settled, as they always do and today the real estate market on the Cape is once again celebrating good times.

For the first time, prices have returned to their 1987 levels. Buyers have returned in droves, and 1998 was a record selling year for real estate on the Cape with more than a billion dollars in properties sold. The Cape is a hot commodity for baby boomers nearing retirement, as well as Wall Street moguls on the lookout for summer homes.

“Real estate on the Cape is strong and it’s going to stay strong,” Jamie Regan of CENTURY 21 Regan Realtors in Mashpee said. “In the ’80s when prices were high, interest rates were double. Now they are low. Baby boomers are aging and inheriting a lot of money. It’s not cool to spend it on a red Porsche, but it’s OK to buy a family house.”

The Cape is like a movie star, hounded by paparazzi and chased by fans. The things about the Cape that bring back tourists year after year are the same things that hook potential buyers. Its reputation has never been higher and its fame never more widespread, thanks to pounding efforts by the Cape Cod Chamber of Commerce and other tourism agencies. No more do real estate agents on the Cape have to sell “the Cape” as a great place to live - potential buyers have their minds made up.

Marie Connolly of Connolly Real Estate in Chatham remembers the early ’90s, when she was just starting in the business. “Real estate was in a slump and we thought, ‘How do we promote our properties to people off-Cape, in New York or New Jersey?’ Now we have to be ready to respond to people calling in. By the time we get them, they are already interested,” she said.

The arrival of the Internet, too, has spread interest around the country and around the world. Cape real estate agents are splattered all over the Web, each showing off prize listings and pertinent information. Before, a potential buyer living in Phoenix or California or New York only knew about new listings if he arranged to have the Cape Cod Times sent through the mail.

Connolly has worked with buyers from Canada, Germany, England and elsewhere. They are not just content to visit - they want second homes. They want to call themselves Cape Codders. And all they need are deep pockets.

“I worked with a couple from Chicago, who were originally from Ireland,” Connolly said. “It was their first time coming here. They drove by a house with a ‘for sale’ sign and came to my office. They looked at two houses and bought one. They had never been here before. But that's not uncommon.”

Individual areas of the Cape can cast their own magical spell over buyers. Connolly also sold a house to a couple who had vacationed for years in a rental property in Wellfleet. One day they decided to leave the highway a few exits earlier than usual and visit Chatham. They immediately called her office wanting to buy.

Vacation home buyers and second-time home buyers make up the bulk of the Cape’s business. Most agents handle few first-time home buyers, those young couples just starting out in life with little money and no homeowner experience, and some won’t work with first-timers at all. Connolly estimated about eight percent of her business are first-time buyers.

“Although salaries have come up, it’s hard for young kids to get started on the Cape,” Regan said. “Few lower priced homes are around, and even those are drying up.”

A glance through the Real Estate Book for the lower Cape shows a small Cape-style in Brewster for $99,000 and a ranch in Eastham for $99,000, and a smattering of listings under $120,000. By far the majority of the book showcases houses priced at over $200,000.

John Barrett of John Barrett Real Estate in East Falmouth assists many first-time home buyers, and he admits to seeing fewer and fewer buyers in this income bracket. He works with them, helps to clear up any credit problems, and searches for a house. Sometimes the process can take two or three years. “We tell them to stick in there and not get nervous,” he said.

First-time home buyers must also fight for cheaper listings with business owners who need large amounts of housing for their summer workers. Most of the Cape’s summer rentals are snapped up by tourists, leaving no place for incoming seasonal workers to sleep. This situation has forced business owners to but their own housing.

Rentals, particularly summer rentals, are experiencing about 20 percent growth a year, Regan said. “The demand is there, but not the supply,” he said.

Vacationers can spend from $1,000 a week to $1,000 a day on a Cape cottage. The pricier places go the quickest because they are in shortest supply. People who can afford the higher priced homes that pull down the big rents don’t usually need (or want) to rent, he said.

On the other hand, renting can be a means to an end for a family with less cash. Many people are able to afford those second homes if they agree to share it with renters.

Because of the demand for vacation rentals, buying a home on the Cape is generally a solid investment. “When you invest in Cape Cod real estate, you get the added benefit of enjoying it,” Regan said. “It’s a tangible not found in stocks and bonds.”

Supply and demand is fueling the prices of homes and land Cape-wide. During the last few years, land prices have jumped 30 to 50 percent. House prices have steadily risen and keep rising. There is a sense that available land is running out on the Cape, and the fear is pushing the market upwards.

A new phenomenon on the Cape is the bidding war. A property is listed, and two or more interested parties quickly offer to buy it. Each buyer then offers more and more money in the hope of outbidding the other party and winning the property. Sometimes buyers will immediately offer the seller a higher price than the listed price to make sure they get it.

Other sellers, seeing the high prices that buyers are paying, are making up their properties. This all leads to houses being sold for far more than the appraised value.

Although prices are higher, which means the agent’s cut is larger, agents are not overly thrilled with bidding wars. “Multiple bids are not good because they means somebody is going to walk away unhappy,” Regan said.

Buyers are also moving much quicker than in the past. During the recession, properties could sit on the market for three or four years. In the past 18 months, the average number of days a property stays on the market had dropped from 180 days plus to less than 90 days.

Connolly can remember the days when she worked with second-home buyers for a few years, searching for just the right house. No more. “Now we don't have the luxury or that latitude,” she said. “If they see it and like it, they have to do something right away.”

Nowhere is that “gotta grab it now” attitude more prevalent than in the sale of land. With so much of the Cape gone, developers and conservationists are fighting a bitter battle over the land that is left. Many towns are considering or have adopted annual caps on building permits. Residents overwhelmingly spoke out in protection of the land when they passed the Land Bank bill.

Real estate agents recognize the tug-of-war, but also realize why the Cape is in such demand. For them, it’s ecology vs. economics, and both sides have merit.

“We want to preserve the quality of life here on the Cape,” Keith Bradley of Coldwell Banker Atlantic Realty in Orleans said. “By limiting the development, it slows things down and assures the Cape of preserving not only its beauty, but the ecological base that makes the Cape unique.”

“Builders know they could be building themselves out of business,” Barrett said simply.

With land at a premium, new houses are no longer cheaper than used houses. The tide has shifted, and remodeling is the wave of the future. Major renovations and “tear-downs” are already the norm in highly-desirable ocean-side neighborhoods, such as Popponesset in Mashpee and Common Fields in Barnstable.

While real estate agents are riding high on the strong market, there is a clear downside to their success. Listings, or the inventory of properties to be sold, are down by about 30 to 40 percent.

“The next few years are going to be very challenging with such low listings,” Regan said. “We have some 35-year-old contemporaries at New Seabury that are hard to renovate, round houses and other out-of-date styles. But just because of the low listings, we are getting people to consider other properties.”

Barrett disagrees. He brings out an MLS (Multiple Listings Service) book for the Cape, fat with available properties. There are things to sell out there, he said, although the changing market means agents will have to work harder.

He is cautious about these times and fears the market mirrors the late ’80s. “In the early ’90s, people said we would never have the ’80s again,” he said. “Now values are just as high and we’re beginning to see some speculation now. Speculation always comes at the end of the market.”

Other agents point out the differences between now and then. Interest rates are low, banks are not dabbling in questionable loans, hundred-home subdivisions have disappeared. As long as the stock market remains strong and the economy continues to boom, people will have those few extra dollars for vacation homes on the ever-popular Cape.