Are rising seas eroding Nantucket home prices?

A property recently sold for as low as $200,000, and this is not the first time something like this has happened. Is it a trend? Not so fast.

Earlier this year, when a waterfront Nantucket home sold for $600,000 with the beach “nearly gone,” it was shockingly unusual.

Shelly Lockwood, a Nantucket-based real estate broker, said the person who bought the house is aware of the limited time he has with it. “Nobody knows exactly how long it will last, but it won’t be ten years,” Lockwood said.

Lockwood said the owner will never be able to sell that house again, unless he finds someone like him who is willing to take that risk. For the current owner, getting one summer or two, at best, is worth the price he paid for the house, she said. “He knows that. He knows he’s the last owner.”

And now, yet another waterfront property in Nantucket sold for as low as $200,000. Inching dangerously close to the sea, the days are numbered for this home. The two properties are a part of the pool of vulnerable waterfront homes constantly threatened by coastal erosion.

What’s a buyer to do?

So what happens to properties that are vulnerable to the impacts of climate change such as coastal erosion?

Lockwood gave some options, one of which is literally moving the house. “It’s a thing we do here. We pick up houses and move them. It’s not unusual,” Lockwood said, adding that at least 12 houses get moved every year.

Owners of waterfront properties are aware of the problem, but not every coastal home is at risk, Lockwood said. She added that people who live on the island understand that the ocean is “a huge force and we’re never going to stop it.”

But if that is the case, why do people keep investing in at-risk properties?

People want to own a waterfront home, Lockwood said, and they are willing to lose money to have a house by the sea. “People love waking up and looking at the ocean,” she said.

For Lockwood, the more difficult conversations she has is with the sellers of these at-risk properties. Lockwood and a couple of other people started working together in October to create a class for real estate agents on the island on coastal resiliency and the risks related to rising sea levels. “Our hope in creating the class was that agents fully understand the problem. … I would be more comfortable if buyers came expecting to hear what the risks were.”

Are home prices on the island retreating?

Lockwood said homes on Nantucket as a whole are not losing value; it’s only certain oceanfront ones. “We’ve had a 9% year-on-year [increase] for the last five years. The values here are going up.”

The median home price for a single-family home on Nantucket in May was $1,900,000, a 15 percent year-over-year increase, according to The Warren Group, a real estate data analytics firm.

“The island is coming to terms with the fact that this is an inexorable issue that will continue to affect those properties on the ocean in Nantucket,” said Chris Farley, a Nantucket mediator who helps the owners of homes losing value reduce their property taxes. “I only want people to pay what’s fair and not $1 more.”

He said the island is in a transition period, one in which people who are willing to lose money to have a couple of years living on the ocean are not going to buy those homes for above the assessed value. It is now moving to a point in which home values are going to be reduced because people can’t afford to lose money just to be on the ocean for a couple of years, he said. “It’s kind of like renting. I don’t think that’s sustainable.”

The solution to the rising problem? “Either move it, demolish it, or wait it out,” Farley said.

A rude wake-up call

Jim Neumann, a principal at the climate change impact and adaptation analysis firm Industrial Economics, said it is hard to find dramatic cases of dropping home values such as the house that sold for $600,000. “I recall it had lost a very noticeable amount of beach width between listing and sale, owing to erosion associated with winter nor’easters,” Jim Neumann said.

While people are willing to pay quite a bit to be closer to the shore, proximity to the coast also has negative aspects, such as risk to the structure and the land from storm surge, sea level rise, and erosion, he said. “It’s not always clear which of two influences has a stronger effect on property values.”

He added there are indirect impacts of climate-induced coastal risks as well, such as business interruption and storm damage that leads to power outages. It impacts a broader range of stakeholders, including renters, local businesses, and even local tax revenue.

‘He knows that. He knows he’s the last owner.’

Shelly Lockwood, Nantucket realtor

While investments in reducing greenhouse gas emissions and adapting to climate change is prudent, “exactly how adaptation progresses in Mass., where, and who pays for it, is a complex question that could take years to answer,” Jim Neumann said.

“Markets are just starting to wake up to the disruption that climate change is bringing to our landscape,” said Johanna Neumann, senior director of energy campaigns at Environment America, a national network of environmental groups.

Johanna Neumann said she does not know of any vetted control plan to address the problem of rising oceans swallowing homes. She pointed to Boston’s Seaport District, where “construction continues with the idea that seawalls will protect the investments.”

Policies that have shielded the real estate market from factoring in rising seas have led to an overvaluation of coastal property, she said. “Some experts worry that continued overvaluation of coastal properties without correction could trigger a larger market collapse.”

The island of Nantucket might be witnessing a pattern.

Farley said that the coastal impact of climate change is not linear. There could be a winter on the island with no storms or erosion, and then the next winter could have two to three storms that take away 20 feet of beachfront. “We’re all subject to what nature brings to our island,” he said.

“I just hope that the town, and the rest of the townspeople, can come together and figure out a solution which works for everyone.”