Lessons from the last economic downturn

We don’t want to downplay the severity of the current COVID-19 situation. It will likely be very difficult in the near term — we’re beginning to see that already with several cases on-island and the community bracing for more. The difficulty, especially economically, will continue with perhaps the third major economic crisis in the past 20 years. But in the long-term, past evidence points to a strong recovery. 

Prior to the current health crisis, market forces on Nantucket were screaming upward. Just a few short weeks ago we were riding high on one of the longest and most profitable periods of home sales the island has ever seen. Market-value sales were up and affordable rentals and purchases were down. Over the past few years, we’ve heard more than a few people on Nantucket say, “All we need is a good recession to bring the market back into line.”  

But is this really true?

Maybe a look at the past economic downturn will give us some insights into how the Nantucket market behaves during a correction. 2009 to 2011 was a very tough time for Nantucket. We experienced a wave of foreclosures, and more than a few homeowners were left underwater. It was, to put it bluntly, very bad. 

But perspective is everything. If you look at the trajectory of the Nantucket economy from the last 20 years, the fallout of the Financial Crisis was a blip on the way to a massive climb in property assessments, from $5 billion to $25 billion. Over this time, more than 16,000 building permits were issued.

A look at restaurant and lodging receipts (rather than real estate values) shows the town went from collecting about $1 million a year in the early 2000s to nearly $5 million by 2018. Easy to forget there were recessions in between.

Bottom line: The attraction of the island will continue and the market will recover.

There’s a saying in politics: “Never let a good crisis go to waste.” The question is, are we going to use this critical inflection point to reset our goals and actions to make ourselves stronger as a community? Or are we going to recover and just go back to unbridled development, a growing housing crisis, more congestion, and the systematic erosion of our community?

While we recover from this crisis, our short-term goal as an organization is to build a dialog around the former — making the community stronger. Stay tuned.

Have a great Sunday. 

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