Ripple Effect — Rising House Prices, Summer & Cape Cod’s Future

CAPE COD – Cape Cod real estate prices, fueled in part by reactions to Covid-19, are appreciating in value at the fourth highest rate of any “metro area” in the United States, according to the National Association of Realtors.

The hot market, if it continues, will arguably change the future of Cape Cod in fundamental ways. Or rather, it will accelerate change that is already happening.

And with the coming summer projecting to be at full capacity, and remote work becoming maybe a long-term reality that is also helping push Cape prices higher, local officials say some dire and noticeable changes may be coming fast.

“Covid-19 has been an economic disruptor,” said Paul Niedzwiecki, former Executive Director of the Cape Cod Commission and the incoming (as of July 1) CEO of the Cape Cod Chamber of Commerce. “It has changed people’s behavior – the way we work and where we choose to live.”

“I think this summer is going to be the greatest economic summer the Cape has ever had as long as we can figure out a way to service the people who are going to be here.” – Ryan Castle, CEO of the Cape Cod & Islands Association of Realtors.

Beyond the economic impact of the pandemic on Cape real estate prices, there is also the impact this summer of the loss, due to continued travel restrictions, of the needed seasonal influx of thousands of international workers – with J1 and H2B visas – that have annually filled in the gaps.

Meanwhile, because of those skyrocketing prices and decisions by landlords to either sell or rent to vacationers for huge profits, local workers are being priced out of housing.

“There is very little on the market, and there are a number of significant ripple effects,” said Andrew Gottlieb, Executive Director of the Association to Preserve Cape Cod (APCC). “All of the employers, the ones that survived, are going to have too much business and not enough people to handle it,” he said.

“There’s a demographic change going on,” he said. “A number of properties that were formerly on the rental market no longer are, causing a further tightening of the types of homes available to people.

“If you have a place to stay, you can probably get a pretty high wage,” said Gottlieb. “But if you need to rent a place to be able to work here, you probably can’t find a house. And if you could, the prices are so high that it won’t matter matter what your wages are at the fish fry place.”

“I think this summer is going to be the greatest economic summer the Cape has ever had as long as we can figure out a way to service the people who are going to be here,” said Ryan Castle, CEO of the Cape Cod & Islands Association of Realtors.

“Businesses are not going to be able to meet the demand. There’s not enough people to work. There will be longer lines,” he said. “I anticipate a fair bit of frustration in the community,” he said.

But will the community recognize the problem as an issue of housing? Is zoning, that sacred cow of Cape Cod issues, ready for a region-wide update?

And as for those dire changes that are expected to arrive on the Cape this summer – if they do, are they here to stay?

It may depend on how the community as a whole reacts.

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Cape Cod Is VERY Popular Right Now

In the past year, “there has been unprecedented use of our public lands,” said Gottlieb. “People came to Cape Cod to escape the crush of the cities and enjoy the relative safety that our open spaces were perceived to provide.”

Because of the lockdown and the transition to remote work, said Gottlieb, “people were here much later into the fall, and they came back earlier the spring,” he said. “Our quiet period was much less.”

And now that summer is coming and people are traveling again, but not so much internationally, Gottlieb said, Cape Cod will soon be at full capacity.

“Every real estate person I talked to said all the really attractive summer rentals were gone by January, and everything else was gone by March,” he said.

“We’re going to be at 100 percent capacity,” he said.

And Castle said, “We’re hearing, on average across the board, that there is 10 percent less availability of homes for rent in the summer than usual.”

“There are no vacations left to book in the summer,” said Castle. “By and large we are at 95 to 99 percent booked for weekly rentals,” he said.

 

The Conversation Again — Talking About Problems

The rinse-and-repeat “conversation” about Cape Cod’s imminent future of high-priced housing and not enough workers has been going on for years. The pandemic has accelerated all the trends.

In mid-May, the conversation happened once again on Zoom and it included several of Cape Cod’s movers and shakers – heads of non-profits and a representative of a large employer joined together for a “State of Cape Cod” summit.

For this story, Cape Cod Wave Magazine talked to some of those who attended that meeting and also with Niedzwiecki.

There is alignment now, all agreed. Change for the better is actually happening, it was said. That case is always made. 

“I think we’re starting to see some progress, said Matt Pitta, Director of Communications for the Davenport Companies. Davenport is the largest private employer on the Cape, said Pitta. The company owns 600 residential rental properties on the Cape, he said.

“The summer will be very telling,” said Pitta. “The community at large will see the need for housing.”

“We can make progress on this,” said Niedzwiecki. “The intensity is much greater than it has been. The hope is that intensity, and what we’ve all been through as a community” will make a difference this time, he said.

So what happens next? That is always the question.

“The thing that is permanent, the discussion is a long-term one,” said Gottlieb. “Is this the time to make changes to the diversity of the housing stock?”

“There is a monoculture of single family homes on the Cape,” said Niedzwiecki.

Gottlieb said, “I’ve seen enough of what we’ve done and the implications of it to say maybe we should try something different.  What we have done to the landscape is an ecological disaster, and it’s priced the middle class out of the market.”

Besides high housing prices, Gottlieb said Cape Cod’s zoning producing “single family detached houses, each one with a manicured lawn… is breaking up the natural wildlife corridors. There is intense nutrification of our water resources, and loss of native habitat.”

But can Cape Cod change the model, or at least pivot to adjust to current circumstances?

“You have to build a movement around wanting to make the Cape a more sustainable year-round  community,” said Castle. 

“There is no one answer to the housing problem,” said Niedzwiecki. “And housing bleeds into every other issue we have on the Cape.”

Alisa Magnotta, CEO of the Housing Assistance Corporation (HAC), put it another way in the May Zoom meeting: “Housing is our weakest link, and it has a direct link to all the outcomes we as a society care about.”

 

What’s Happening & Why? — “The supply and demand curve is a powerful thing.”

Cape real estate historically has fallen with national real estate dips, but it never falls for long. As the saying goes:, “They’re not making new land on Cape Cod.”

After decades of development, there’s almost no vacant land to build on. Plus this is, after all, Cape Cod – property is both highly priced as well as located between the money coming in from Boston and the money coming in from New York City, and Connecticut etc.

“The supply and demand curve is a powerful thing,” said Gottlieb.

There is also the seasonal nature of the Cape in which 35 percent of all houses on the Cape are second homes, said Niedzwiecki. 

“The supply and demand curve is a powerful thing,” – Andrew Gottlieb, Executive Director of the Association to Preserve Cape Cod

“The question is, what is a second home in today’s world?” said Castle. “If you spend six months in your Cape Cod home and six months in your Florida home, which one is your second home?”

The number of second homes is “high on the Outer Cape in towns like Truro, with over 75 percent of the houses being second houses,” said Niedzwiecki. “Sandwich has the lowest, with 17 percent of the housing stock is a second home,” he said.

Since Sandwich is close to the bridges and access to Boston, Niedzwiecki said it “is somewhat of a commuter community, unlike the other 15 Cape towns.”

“Some of these communities have become more seasonal than others,” he said. “It’s not the same kind of people that bought all of these homes. There’s going to be sub-regional differences.”

But lack of land and a prevalence of second homes is an issue in all Cape Cod towns, he said.

There is more than just the diminishing supply of houses affecting prices. The future of the very nature of work – remote or in-person – will have a huge effect on supply and demand. Theoretically.

The quick transition to remote work because of Covid-19 has had a major impact on who could live and work on Cape Cod full time, said Niedzwiecki. “Changes that we thought were coming in 8 to 10 years came in one year,“ he said. 

And then there’s the price of lumber, which has skyrocketed – causing any new construction or re-builds to also rise in cost.

All of this on top of the danger of the pandemic and its affect on a market where Cape Cod, with so much beautiful open space, felt safer than many cities.

“There are multiple dynamics that are working” to raise prices, said Niedzwiecki.

Niedzwiecki said the Cape Cod Commission is surveying “people that we know moved here… How many people that bought houses since the pandemic have chosen to live on the Cape and work remotely” is unknown, thus the survey, he said.

“What we’re trying to do is build a framework for local discussion and have that framework be built around data,” said Niedzwiecki. “Then we want to give that to the communities. On a regional level, that’s the best we can do; get the facts to the community and see if that can manifest itself in some zoning changes.”

“Right now, it’s different,” said Magnotta. “What is happening is unprecedented, and pretty soon we will be looking in the rear view mirror and saying, “Oh my gosh, we should have done something.”

“The market right now is not sustainable,” said Castle. “Prices are escalating quickly and we don’t have enough housing to sell.”

 

What Houses Sell For & How Fast They Sell

The median price for a single family home on Cape Cod for the months of January through April rose in one year from $438,500 in 2020 to $600,00 this year, said Castle.

The median number takes all of the houses that were sold during any particular time period and is “the middle one of all those sales,” said Castle. The median price is a different and more accurate representation than average price, he said, “because the average price could be swayed by one person selling one $10 million house for too much.”

So about that median number… Start with that crazy big first number from 2020 for any working family on Cape Cod, and then fast forward your mind through the pandemic to the second number – a median price as of now of $600,000 for a single family house on Cape Cod.

Oh, and there are not very many houses for sale at any price on Cape Cod. Typically, said Castle, including two years ago, about 2,000 houses have been for sale at any given time on Cape Cod. Last year, it was 1,800, he said.

This year, the number of houses for sale at any given time has averaged 400, he said.

There is a huge demand and a low supply, said Castle. “The big question is why are people not selling their house. What exactly is happening to keep homes off the market is really the question,” he said.

The answer, said Castle, is that when there are not many homes to buy, it becomes “a roundabout circle. There’s nothing else to buy so I don’t sell my house… what I have to buy is so much more expensive that it’s not worth selling my house.”

Houses are priced high, there are not many of them, and to complete the trifecta, they are selling very fast.

A number measured to check the health of the market, said Castle, is how long it would take to sell all the existing inventory on the market at the current rate of sales.

“A healthy market has six to nine months of inventory,” said Castle. Cape Cod has skewed a bit lower at four to five months, he said. But in the last year, “it’s down to eight-tenths of a month. Everything would sell in less than a month,” he said.

The median number of days on the market in April, said Castle, was 8 days. “Houses are showing for the weekend and they get 10 to 20 offers at times, and they go for well above the list price.”

Pitta said a person he knows recently purchased a house by “bidding $40,000 over the asking price.”

“This is a real crisis for the Cape,” he said. “We’re at a real pressure point.”

Magnotta said she is noticing the effects at HAC. “The market is so incredibly hot right now with so little inventory that people have no place to go,” she said. Many of the deals are cash deals, she said.

“Buyers don’t need 60 to 90 days to close,” said Magnotta. “They might want it in a week or two. [Renters] are getting paid to leave. They are living in campers and tents or couch hopping,” she said.

“We are shocked by the number of people who are coming in who have lost their rentals,” said Magnotta.

The issues have existed for years. The surge in prices has intensified them.

“It’s frustrating as hell to keep saying the same thing over and over again, and trying to create a sense of urgency,” said Magnotta.

“We need to quit talking and analyzing, and start taking action,” she said.

 

International Workers & The Coming Summer

“Cape Cod has a boom every summer,” because of the seasonal nature of the tourist economy, said Chamber of Commerce CEO Wendy Northcross at the mid-May Zoom meeting.

“Restaurants, landscaping, health care systems… every business you can think of has more customers and needs more people to work,” she said.

Every year, the workforce of 100,000 people must add an additional 15,000 to 20,000 workers for the busy season, she said. Some of those jobs are filled by Cape Codders, and some by college students, said Northcross.

But the Cape is also “dependent on two very important Visa programs,” she said. The H2B and J1 programs bring in between 3,000 and 5,000 workers every year. 

In both cases, there has been “a huge constraint” on the number of visas issued, said Northcross. Workers must be interviewed at the US embassy, “but some of those haven’t been open.”

“Add in travel restrictions and the lack of a vaccine, and it’s been a disaster,” she said.

The J1 visa is a cultural exchange for students out of college to work in the US. “It helps other students understand our culture,” by living and working here, she said. Workers on that program all need visas to return.

While some H2B workers never went back to their home country and may be returning to the Cape from a seasonal job in the Florida or somewhere, many are in their home country and cannot get back because of pandemic travel restrictions, or closed embassies.

“There’s a lot of teeth gnashing going on right now,” said Northcross.

 

About Wages & Housing

According to a 2020 report entitled, “Out of Reach; The High Cost of Housing” by the National Low Income Housing Coalition, Massachusetts is the third most expensive state for renters in the country, trailing only Hawaii and California.

And in Barnstable County in 2020, according to the report, renters needed to earn $29.10 an hour in order to afford rent a two-bedroom house without spending more than 30 percent of  their income on housing.

A person would need to hold 2.3 full-time jobs at minimum wage to afford a 2-bedroom house at fair market rate. An annual income of $60,520 is needed, according the report.

Some jobs on the Cape pay that much. Many do not.

And those numbers are from before the past year’s housing price spike.

The housing problem on the Cape, said Gottlieb is “not a wage problem. It’s a perpetual myth that wages on the Cape are lower. It ain’t the wages. It’s the cost of housing.”

Gottlieb argued that wages can’t be allowed to drive prices so high that tourists will “take their vacation dollars elsewhere.”

“We live in a competitive environment,” he said. “There are limits to how much you can charge for certain things.”

“The cost of labor shows up somewhere,” said Gottlieb. “In the cost of burger, or it comes out of the owner’s pocket, or the quality goes down,” he said.

Most businesses on the Cape are small and don’t have the ability to absorb a huge spike in labor costs, he said. But, he added, “I’m sure you can find a poster child of excess.”

Magnotta argued that the fact that workers can’t find a place to live is “not an employer problem. That’s all of our problem. If the economy shuts down what are we, just a museum?”

“We need to de-couple those things; a wage increase and housing,” said Magnotta. “We don’t have enough housing. We need to address the issue directly.”

“Should there be a pay increase? I don’t know,” she said. “But the housing shortage is not a pay equity problem. The housing shortage is a planning board problem, a select board problem, a town problem and we need to address it,” said Magnotta.

 

What Happens After Summer?

“I don’t know what’s going to happen in the workforce,” said Gottlieb. “Is the work-at-home or hybrid model going to be long term, or is it going to be, ‘Get your ass back to work.’”

Those bigger decisions will affect the real estate market, said Gottlieb.

“The question is what does it look like one, two, three years out?” said Castle. “Long term, do the people that bought second homes want to keep that second home? Will the office require them to come back to work?”

“A lot of those decisions and how people adapt to a post-pandemic world is going to really affect the real estate on Cape Cod,” said Castle.

“We have a workforce that can’t afford to work here. This is basic home economics. When your rent is more than you can afford, you leave.” – Alisa Magnotta, CEO of the Housing Assistance Corporation

“Right now it is difficult to make predictions that this [the hot real estate market] is permanent,” said Niedzwiecki. “But I don’t think anyone thinks there will be a major correction to pre-pandemic times.”

Thus, high prices and the housing squeeze caused by those prices are expected to continue to change Cape Cod in profound ways.

“We have a workforce that can’t afford to work here,” said Magnotta. “This is basic home economics. When your rent is more than you can afford, you leave.”

“What happens when you don’t invest in housing and you have a seasonal economy?” asked Magnotta.

The canary in the coal mine of that scenario already exists in Provincetown and on Nantucket, she said. The sad math of rising prices and increased demand has changed both places dramatically in just a few decades.

“Those used to be very livable places,” said Magnotta. The fear is that the changes that occurred in both places – specifically, the disappearing year-round rental housing – are spreading across the Cape.

And the new fear is that those changes have been accelerated in the past year.

 

Change? — “A Group of Business Leaders “can’t just get together and decide…”

Will Cape Cod’s future include housing for those who work here?

“The challenge is, how do you protect the unique qualities that make this such a special place, but also provide housing and infrastructure,” said Niedzwiecki.

As for looking for answers, Niedzwiecki acknowledged, “It seems like some of these meetings get repetitive.”

“We all need to be part of the conversation,” said Pitta. “The Cape is going to have to have a serious conversation as to how we move forward.”

But as Castle said, “Ultimately, it takes action. A group of business leaders can’t just get together and decide” to make changes.

“You can’t just say, ‘I want this type of housing,’ and have that housing built,” said Castle.

“You have to get people to agree that you all want to go in the same direction,” he said.

“There are people who moved here or who grew up on the Cape who want it to be like it was when they first got here,”said Castle.

“But nothing is ever going to stay the same,” he said. “Change is inevitable.”

 

Cape Cod Has 15 Quaint Towns — Change Occurs Locally

“I feel like we are getting traction here and there,” said Castle.

One change that has been pushed for years with limited success is to allow for homeowners to build an accessory dwelling unit. The problem, said Castle, “is people don’t want new housing in their neighbor’s backyard.”

Magnotta called that attitude, “complete NIMBY [not in my backyard] ridiculous.”

“Accessory dwelling units are a really quick short-term solution that could add hundreds of units to the marketplace,” she said. “My primary investment is my house… I should be able to monetize it in a way that not only helps me, but also helps the community.”

This, of course, is a zoning issue and zoning on Cape Cod has been traditionally full of complete NIMBY ridiculous. Yet Magnotta and others pointed to a recent change in state law that allows zoning changes to pass with a majority vote at town meeting. It had been two-thirds in-favor required, which had often proven to be a hurdle too high for local zoning changes.

Still, Magnotta said that any zoning changes require action from people in their own communities. “Because we have representational town meetings, the problem has to become a community one.”

“We need people to get out and talk about this. How it impacts our community, our schools, our health care system,” said Magnotta of the housing issue.

Beyond accessory dwelling units, Magnotta pointed to the need for new housing and an acceptance of extra density in some places. 

The enemy of this, of course, is that word so associated with Cape Cod: quaint. Things should not change in such a quaint place. It has always been an underlying attitude in all things zoning on Cape Cod.

“We have quainted ourselves to death,” said Gottlieb. “Great, we’re quaint,” he said before adding, “and the estuary down the street is green with algae.”

Beyond the environment, Gottlieb said zoning on the Cape has manifested itself in “all manner of social and societal ills.”

And new people are moving here because they, theoretically, like it as it is: quaint.

 

Mapping The Future With Hope 

But things are changing, argued Gottlieb and others. “We, APCC, and the Housing Assistance Corporation are working together,” he said. “We are working to find the places with overlap that would benefit from wastewater treatment and would also be appropriate for greater density.”

“Right now there are several commercial properties sitting empty,” said Magnotta. “Because of our wastewater problem, we can’t convert those to housing,” she said.

Maps showing these overlap areas in each town are being developed, he said. “Right now the maps are in draft form. We have met with half the towns so far,” said Gottlieb.

Some town centers could expand commercial building to hold a second floor of housing, said Magnotta.

“Will it be universally embraced in every town, in every village? No,” said Gottlieb. “But will it be embraced by enough towns that realize that they have a myriad of challenges. It sure will.”

“Everybody knows what the problem is,” said Gottlieb. “People are looking for some guidance. That’s what you hear from people.”

Niedzwiecki pointed to progress being made in the mid-Cape with “700 units of housing in the permitting process in the greater Hyannis area.” Mashpee Commons, he said, has a planned expansion of 1,500 unites.

“If we start to get them in chunky activity centers, and layer that on top of accessory dwelling units… we can start to make progress towards solving the problem,” said Niedzwiecki.

Magnotta said, change will come down to local communities taking action. And that means that local citizens who care must speak up, she said.

“We need people who care to go to town meeting and speak up,” said Magnotta. “I’ve seen that who shows up is what matters. It matters to people to hear reasonable people talk about the benefits, the need for something like housing,” she said.

But Magnotta knows there is plenty of quaint NIMBY opposition. “There’s such a huge disconnect,” she said.

“Everybody wants affordable housing unless it has an address and that address is next to yours,” said Magnotta. “Then every single excuse in the world comes out.”

But the changes Cape Cod needs can occur if enough people speak up, she said.

“I don’t have a lot of confidence,” said Magnotta. “I have a lot of hope.”

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–PLEASE SEE You Can’t Sell Right Field,  a novel from Cape Cod Wave about land for sale, a crooked developer, a softball team called, “The Townies,” and an election.

Based on the true story of a Cape Cod development.