For decades, Nancy Tubbs merely fantasised about owning a holiday home in Cape Cod. Her childhood summers were spent romping on the beaches of the arm-shaped Massachusetts peninsula and, as an adult, she kept returning for August holidays. “Every time I went, I just loved it,” says the publicist, who now lives in Palo Alto, California. “It’s the natural landscape – the marshes, lakes, sand dunes and the beaches. But the thing that makes it most magical for me is that there are no skyscrapers there, no office buildings. You go to relax, you don’t think about work.”
Although she kept tabs on the Cape’s property market via real estate websites over the years, the prices were always out of her reach. In recent months, however, as the US recession took hold and prices collapsed, she started to look more seriously. Last month, she finally bought an 800 sq ft, two-bedroom new-build condominium with a view of Pilgrim Lake, in Truro, at what she considers a bargain price – nearly $50,000 less than it may have been a year before.
Tubbs plans to spend a month or so there in autumn and summer and rent it out during high season for about $1,500 a week. “The finances had to work out so that in a standard year of rentals it would still be a decent investment [offering the same returns as] a money market fund,” she says. “And I think people will always to want to come to the Cape in summer.”
She is not the only aspiring Cape Cod homeowner who has decided to strike now. The precipitous drop in house prices in desirable communities, combined with historically low interest rates, has created a modest boom in the area’s holiday property market. “It’s all those magical stars aligning,” says Thom Schoepfer, a broker at RE/Max Classic. “The Cape holds a place in the hearts and minds of people and there’s real value here. You get it from personal enjoyment and use, income if you rent your home out and appreciation if you hang on to it.”
He says many prospective buyers are seeking a solid, long-term investment. “The market may only be down 5, 10, 15 per cent in a given community but there are properties selling for 40 per cent less [than last year],” he says. “And with the stock market so unstable, people view a second home on the Cape as relatively secure.”
Along with neighbouring Nantucket and Martha’s Vineyard, Cape Cod is one of the most celebrated summer holiday spots in the US. A former whaling and merchant region that has transformed itself into a resort blending sophistication with old New England charm, it has 560 miles of coastline and, until recently, its property market was thriving. But now it is feeling the pain like everywhere else.
According to data from the Warren Group, the towns of Brewster and Falmouth each saw large house price declines in 2008, as did Hyannis, where a rising number of repossessions and depressed sales pushed the median price for a single-family home down to $205,000 by the end of the year.
As a result, the Cape has started to attract more bargain-hunting second-home buyers. In Yarmouth Port, for instance, the percentage of people buying holiday properties – as opposed to primary residences – rose from 25-30 per cent in a typical year to 48 per cent in 2008. In Brewster, the percentage rose from 35-40 per cent to 56 per cent. “The further east on Cape Cod you go – to Brewster or Yarmouth Port, for instance – the higher the percentage of second homes,” says Annie Blatz at Kinlin Grover GMAC Real Estate. “The further west [you go] – to Falmouth and Sandwich – the more likely you are to see first-time buyers.”
According to the Cape Cod Commission, about 32 per cent of the 152,583 houses on the peninsula are now seasonal or second homes. Buyers tend to be upper-middle-class and middle-aged – people nearing retirement whose mortgages on their primary residences are nearly paid off, Blatz says. “Baby boomers have discretionary money,” she explains. “They have been watching the market, because they know there are good buys out there and interest rates are low.”
Most gravitate towards basic houses derived from the first ones built by English colonists in the 17th century, who were themselves replicating the half-timbered houses of their homeland but modifying them to withstand the US east coast’s tempestuous weather. Over the course of a few generations, the style known as a “Cape Cod” emerged: a modest, one-and-a-half-storey house with wooden shutters. The steep-roof saltbox is another popular option.
“Most second-home buyers are not looking for a $1m home,” Blatz says. “They are looking in the $350,000-$400,000 range. They want a three-bedroom, two-bath house that is reasonably close to the beach.”
Not all the houses are simple holiday cottages however. Historically, the Cape has been the summer home of many prominent, wealthy US families, including the Forbes clan, who own Naushon Island, and the Kennedys, whose famed compound on six acres of waterfront property along Nantucket Sound is designated a national historic landmark, even though it’s not open to the public.
In years past, second-home buyers on Cape Cod were predominantly from Connecticut, New York and New Jersey. But nowadays the area is also a destination for people from all over the US and Europe. (The closest international airport is in Boston, a relatively short drive away.) Jamie Regan at Century 21 Regan Realtors says the latter influx was boosted by the US dollar’s weakness against sterling and the euro up until the end of last year. “Last year we had a lot of foreign investors – mainly Canadians, English people and Germans – buying high-end properties,” he says.
Demand is also coming from people who already own a home on the Cape and see the recent property price falls as an opportunity to “trade up”, he adds. Some are selling their humble cottages for sprawling four-bedroom homes; others are swapping inland houses for condos with water views.
“This is the time to upgrade,” Regan says. “Maybe sellers not able to sell for as much as they would have in 2005 but they can buy a nicer place for much less. They can get a place closer to the beach, or one with more bedrooms and baths or one with a dock. I can remember when you couldn’t find a listing for a house with a dock for less than $1m. But they’re a lot less than that today.”
Kinlin Grover GMAC Real Estate, tel: +1 508-896-4387, www.kinlingrover.com
RE/MAX Classic, +1 508-255-8666 ext 43, www.realestatecape.com
Century 21 Regan Realtors, +1 508-477-5200, www.century21reganrealtors.com
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