The real estate bust has cut sharply into the revenue of the Martha’s Vineyard Land Bank for a second successive year, with land bank income more than 25 per cent lower than it was in 2006, the last of the good years for property sales.
For fiscal year 2008, which just ended, the land bank took in $9.56 million. This was down 14 per cent from the $11.12 million of 2007, which was in turn 14 per cent below the $12.94 million of 2006.
Land bank figures are a good indicator of the state of the real estate market because the funds come from a two per cent surcharge on most real estate transfers on the Island.
And the breakdown of the numbers appears to show that the market has split. The proportion of revenue generated from sales of low and mid-priced homes is substantially down over the past couple of years, while that from high-priced homes is up.
The trend follows the national course of the real estate bubble’s inflation and deflation over recent times.
In 2006, just before the boom ended, when money was easily available, there was a lot of activity in the lower two-thirds of the market, and land bank revenues increased accordingly.
That year, 29 per cent of the land bank’s money came from property sales in the $600,000 to $1.2 million range, which commission executive director James Lengyel defines as the middle third of the market. Another 19 per cent came from sales under $600,000 — the bottom third.
Since then, though, as prices have fallen and loans have become harder to get, the bottom two thirds have fallen away sharply as a proportion of land bank income — from nearly one half to about one third.
Over the same period, revenues from top-end sales have increased in percentage terms — now up to 68 per cent — and held fairly constant in dollar terms. In 2006 the land bank realized about $6.85 million from high-end sales. In 2007 the total was $7.2 million and in 2008 it was $6.5 million.
In short, high-end sales saved the land bank from an even sharper reversal in its fortunes over the past two years.
As it turned out, though, the 14 per cent decline was almost exactly what the land bank had figured it would be.
“We predicted a 15 per cent drop, so it’s one per cent better than we had thought,” said Mr. Lengyel this week. The fiscal year ended on Monday, June 30.
And while the land bank has yet to work out its revenue projections for this year, it appears likely to be another hard one.
Eleanor Wilson of Link, a multiple listing service which compiles Island real estate statistics, said the land bank numbers are consistent with what Island real estate agents are seeing.
“What you might call primary housing, has dropped off,” she said.
But she said more expensive houses, usually second homes, are holding up.
Apart from the factors in play in the national housing market, she also noted one factor specific to the Vineyard, a fall in what she called foreign market buying.
“The Brazilians were shoring up that bottom end,” Ms. Wilson said. “But a lot of them are leaving.” She added:
“I’m showing a 21 per cent drop between the first quarter of 2007 and 2008 in sales.”
One positive is a decline in the number of properties on the market. Agent inventories were down over the year by 11 per cent, from 550 unsold properties to 449.
Ms. Wilson attributed this to unrealistic sellers abandoning the market.
“Those were the people who just put their properties out there, hoping someone would be dumb enough to pay the asking price, saying ‘I’m not going to sell my house if I can’t get absolutely top dollar for it’ ” she said.
“For a long time there were a lot of very overpriced properties. Those, I think, have helped by coming off the market and the inventory now represents properties more realistically for sale.
“Now the brokers are saying if they want to sell it, they have to price it competitively.”