Q&A on ... The 2006 real estate market
Cape Business asked veteran real estate brokers John C. Ricotta and Beth Wade to share their perspective on the 2006 real estate market, which has seen a dramatic drop in demand for residential housing and an uncertain pricing outlook.
What is the current situation for residential real estate on Cape Cod?
There is a continuing increase in inventory levels. Price drops are random. You really have to look at them individually. Every circumstance and anxiety level is different, but no question – in any given week, in Chatham alone there are 10 to 20 price reductions a week.
What do you forecast for the rest of the year?
More of the same, and the trends will continue into next year as well. What is important to remember is the Cape, for the most part, is a secondary home market. When news on a national level is pessimistic, there is a tendency for many people who would normally be buyers to wait on the sidelines to see how it all plays out. There is certainly a sense out there that the Cape is overvalued and that prices are going to have to continue to come down. If the market stabilizes and properties start to move again, people will jump back in the market.
What is your sense of price adjustments?
They are pretty consistent across the board, although properties at the upper levels seem to make those adjustments after a longer period of time. We do not see a consistent percentage drop – 10 percent, 20 percent, for example. Adjustments are based on where sellers’ comfort levels are and what they are trying to get out of their properties, pricewise.
What advice are you giving sellers?
If they are serious about selling, they need to listen to their Realtors in terms of pricing. They need to understand market conditions and especially that what is happening on the national level impacts us here as well. While peak selling season ends about the third week of August, there is a pick-up by mid-September until the beginning of November and even through the holidays.
What advice are you giving buyers?
They are well aware what is happening. They are willing to wait until the right place comes on the market. We try to encourage buyers that if they are looking to purchase a home for the long-term, there are lots of great opportunities out there. If they are speculating, then this is not the right time. We are not seeing a lot of new buyers out there. When we put a new listing on the market, we are seeing some of the same people we saw during the last year or two.
Are sellers getting less reluctant to lower prices?
Sellers are reluctant to lower prices because they think their properties are worth what they are asking. However, many sellers do not give consideration to the use of the money (with comparatively high CD rates) they could have now, as opposed to waiting a year – and sometimes more.
Do you see the price declines of 2006 as long-term?
We see it as a temporary problem. We have to remember we have been through these cycles before, and will again. The question is how long it will last. We think, unless there is a fairly dramatic change in mindset about where prices need to be, under current market conditions, it could last a year or more. So, it certainly is a temporary blip. Now, having said that, we think the price levels at the upper ends of the market will not enjoy the kind of appreciation rates that we have seen in the past.
What is the outlook for second homes?
We don’t believe that owning a second home here can be financed by renting it out during the peak summer months. We think that may have been true years ago, but at our price levels, with taxes, insurance, etc., that is no longer possible. We have counseled buyers that the rental market can be nice and may pay your tax bill and some other expenses, but it is not a money maker by the time you are done paying the expenses associated with renting. The benefits come when it is time to sell; and hopefully the appreciation is such that you walk out of the closing with a big smile on your face.
Has the summer rental market changed in recent years?
There has been so much property sold over the last few years that is not used by their owners for the entire summer. Subsequently, the available property and weeks available is quite large. Savvy renters now wait until the last minute to find plenty of deals out there. The other change is how families vacation. The husband and/or wife that have two weeks of vacation a year used to spend those entire two weeks down here. Now they spend a week on the Cape in the summer and maybe a week skiing or going to warmer weather in the winter. There also was a time when we did not consider rentals for less than two weeks; now one-week rentals are the norm rather than the exception.
John C. Ricotta is president and Beth Wade is vice president of John C. Ricotta and Associates of Chatham. The real estate agency specializes in Lower Cape Cod waterfront and waterview properties for sale and seasonal rental.
Originally published in the Sept./Oct. 2006 issue of Cape Business.
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