Cape Business Trends newsletter January 11, 2007
Summer rental outlook
After years of tumultuous change, the Cape Cod vacation rental market has stabilized. No more shocks from 9/11 or adjustment to the Internet’s phenomenal growth. And the housing slowdown means the end of a years-long mad rush to buy and rent second homes at prices that went through the roof.
All these market-shaking forces seem to have played out, and we now have what we’ll call the “new normal.”
So what does this new world look like? And how do homeowners maximize their enjoyment and investment in second homes?
The 2007 summer season looks like a duplicate of 2006, with higher inventories of homes and greater competition among homeowners, steady demand, modest increase in prices, and a few uncomfortable vacancies for some homeowners.
A year ago, homeowners increased their weekly rental prices for the upcoming 2006 summer season by 3.1 percent over 2005 prices. This year, prices for summer 2007 are up 2.9 percent for a sample of 720 homes that have advertised with www.WeNeedaVacation.com since the summer of 2005.
An in-depth look at the summer rental season will appear in our March-April Personal Finance publication: Building and Protecting Your Real Estate Investment. To learn more about this publication and the opportunities available to target a very select Cape population, please call Bob Viamari or Lisa Braun at 508-385-3811.
Sandwich’s bedroom-community work profile
At a time when many towns on the Cape watch their unemployment rates ratchet up, Sandwich is illustrating anew just how mainstream it is becoming, a veritable bedroom community to Boston.
Consider November’s employment numbers. Sandwich recorded a 4 percent unemployment rate. Compare that with the state’s overall 4.6 percent rate. Even in the depths of winter, Sandwich fares better than the Massachusetts number.
Underscoring Sandwich’s ‘suburban’ character, it fares very well next to a town like Waltham, with all its large employers and proximity to Boston. It reported a November unemployment rate of 3.7 percent. Plymouth also reported a 3.7 percent jobless rate.
David Curtis, CEO of The Community Bank, notes that the Sandwich Chamber of Commerce has “many members with 90 percent of their business now off-Cape. They fly all over the country. Others are home-based businesses that work globally by computer. More and more executives are able to work for companies as far away as Hawaii, but base themselves right here.”
Cape Business’ upcoming special publication on the Sandwich economy will be inserted in the March-April edition and also distributed to 5,000 Sandwich homes. To learn more about this publication and to find out how this targeted town publication can work for you, please call Robert Viamari or Lisa Braun at 508-385-3811. Click here for more information.
Whither housing
The U.S. Census Bureau reports that 18,238 permits for new housing units were issued through November throughout Massachusetts. That’s a 15 percent decline from the same months in 2005. Builders are holding back, and spec houses are nearly non-existent. But many of the most experienced builders are moving into remodeling, which remains strong – especially in higher-end markets.
The New England Economic Partnership is forecasting that home prices in Massachusetts will decline about 5 percent through the year because of weak job growth and slow gains in population and labor force. The nonprofit research group predicts that at the start of 2008, home prices will be 7 percent to 10 percent below peak levels seen in 2005.
The Massachusetts Mortgage Bankers Association predicts that the average 30-year fixed-mortgage rate will rise to 6.6 percent and the average one-year adjustable-rate mortgage will remain about the same at 5.8 percent. The National Association of Realtors forecasts a 6.7 percent 30-year fixed rate and a 5.5 percent one-year adjustable rate.
After two months of shrinking inventories, the Cape Cod housing market experiences a modest upsurge as the New Year begins. After dropping a very promising 23 percent from early October to the end of December, inventories went up about 4 percent over the first week of 2007. For a more detailed look at inventories and median selling prices for all residential property, please click here.
Will we need to storm-proof homes to get insurance?
Many insurers are requiring homeowners to undertake storm-proofing measures to retain their policies. Homeowners may be required to install impact-resistant glass and storm shutters to avoid window breakage; hip roofs to reduce the amount of surface area for the wind to lift roofs; and exterior doors that swing out to provide greater resistance to wind and rain.
Some states are fighting back: Connecticut is getting tough with insurers that are abandoning customers close to the coast.
Its insurance commissioner Susan F. Cogswell issued rules that restrict a company’s ability to drop customers or reject applicants within 2,600 feet of the shore. They also will force some insurers to revise their underwriting guidelines.
She also proposed a “coastal market assistance plan,” which could be up and running in 90 days to help homeowners find an insurer if several others have turned them down.
Under the new rules, insurers are forbidden from dropping at renewal time shoreline customers who don’t install shutters or undertake other mitigation efforts.
Instead, customers will be able to accept a special deductible on hurricane damage, in addition to the policy’s regular deductible.
Insurers will still be allowed to reject applicants for new policies within 2,600 feet of the shore if the applicants refuse to install mitigation, which doesn't have to be permanent shutters. Companies can also impose hurricane deductibles on new customers.
On the Cape, Eastham resident Paula Aschettino formed a group in late 2006 called Citizens For Homeowners Insurance Reform. The group is undertaking education efforts and investigating possible lobbying to combat these recent trends in the homeowners insurance industry.
Cape Business’ upcoming Personal Finance edition, which will be mailed to the 20,000 highest-assessed residences on the Cape, will take a complete look at the insurance picture. To learn more, please click here.
Beacon Hill: Latest on health insurance; tax revenues
The House and Senate passed and former Gov. Romney signed legislation to make “technical changes” in the state’s new health insurance law. As a result, there’s a delay to implement “anti-discrimination” provisions that would require equivalent employer contributions for all employees until July 1, when everyone will be required by law to have health insurance, and affordable plans will be available.
Tax revenues continue to grow steadily but modestly. December revenues were $1.8 billion, but that amount is only $15 million above the recently revised benchmark. For the first half of fiscal 2007, the state’s tax revenues are up about $300 million, or 3.5 percent. While promising to restore budget reductions ordered by Governor Romney, Governor Patrick reiterates difficult fiscal position, citing a $1 billion “structural deficit.”
Business confidence
The Associated Industries of Massachusetts Business Confidence Index takes a slight dip in December. Still, the last quarter of 2006 was the strongest in two years, despite employers feeling less positive about economic conditions.
Looking ahead, Richard Lord, AIM president, says: “The ratings of our state's business climate continue to lag, and there are no sustained indications of a surge in job creation, at a time when we are still 150,000 below our peak employment.”
MassBenchmarks Index indicates slow growth
The MassBenchmarks Leading Economic Index for November 2006 was 2.9 percent, and the three-month average for September through November was 2.6 percent. The leading index is a forecast of the growth in the current index over the next six months, expressed at an annual rate. Thus, it indicates that the economy is expected to grow at an annualized rate of 2.9 percent through May.
State economic growth is slowing in response to the softening housing market. The effects are seen in weak consumer spending and employment; particularly in retail and construction. Payroll employment declined in two of the last four months. The job count in November was lower than in July. The slowdown is also apparent in recent withholding and sales tax revenues. In nominal terms, both the withholding tax base and the sales tax base are lower than they were in August.
“On a positive note, labor force growth has been strong in recent months, and the working age population has been increasing,” noted MassBenchmarks co-editor and UMass Boston professor, Alan Clayton-Matthews. “Technology and science-based sectors continue to do well, suggesting that the slowdown is limited to housing-related activity,” Clayton-Matthews added.
Upcoming events
Looking for something to do tonight? The next Cape Cod Young Professionals event is tonight, Thursday, January, 11, at 5:30 p.m. at Roo Bar, Main Street, Hyannis.
For more information on this and other area business events, visit the Cape Business Calendar. Bookmark this page, as the Calendar is updated daily!
To submit events, send the information to news@capebusiness.net.
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