Cape Cod: Costly Dreams
Of 'Sailing and Salty Air'

March 17, 2004 -- If you're so fond of sailing and salty air that you dream of retiring on Cape Cod, you'd better act fast, because prices on cottages there are going right through their quaint little roofs.

For decades, Cape Cod, the 100 mile-long peninsula that curves out from Massachusetts and into the Atlantic Ocean like a flexed arm, has been a haven for retirees. Almost 24% of the Cape's 226,000 full-time residents are over age 65, double the national rate of 12%.

One reason retirees flocked to the Cape was affordable housing. Just a few years ago, you could buy a three-bedroom ranch away from the water with a basement for the grandkids to play in for about $225,000. Today, the same house will cost you $400,000 to $700,000. Ocean-view lots start at $1 million and houses on the beach cost $5 million or more.

If you can find a house at all. The Cape Cod Commission, a planning and regulatory agency with representatives from each of the Cape's 15 towns, was founded in 1990 to stem uncontrolled growth and to protect the Cape's delicate environment. Since then, communities have put many vacant plots into a conservation land bank and tightened zoning rules on what can be developed. In many parts of the Cape, says Floyd Silvia, president of Prudential Premier Properties, in Osterville, Orleans and Falmouth, there is no land left at all. "Now, you have to tear down a house to build a house," he says, meaning you have to spend over $300,000 for a house you don't want, just to get a piece of land.

The lack of new houses has driven up the price of existing homes. Of the 222 homes listed for sale on the Cape's multiple listing site, capecodrealestate.com, 92 are priced over $500,000. The least expensive unit is a two-bedroom condo in Mashpee for $180,000. For $405,000, you can buy a "vintage bungalow" in Barnstable with a "distant winter waterview." A 12-bedroom pile on the beach in Harwich Port with a private dock and pool costs $5.5 million. And, real estate agents say, prices are doubling every five or six years.

By the time Baby Boomers are ready to retire, says Wendy Beaulieu, office manager of Prudential Premier's Osterville location, they may find themselves priced out of the market. John Rafferty, for example, says when he retired three years ago, the retirement home he and his wife bought in Chatham cost 20% more than the sale price of their family home in Redding, Mass.

Buying as an Investment

Some Baby Boomers are so concerned that they are buying Cape Cod houses today and using them as investments, by renting them out until they're ready to retire, says Ms. Beaulieu, while others are moving to the Cape now and commuting to their off-Cape jobs. But neither solution is perfect.

According to the Massachusetts Office of Travel and Tourism, the Cape draws over two million visitors each summer, many of whom stay in their own summer homes or rent cottages from others. The rental market is brisk and prices, says Lisa Kenny, principal of Real Estate Associates in North Falmouth, range from $750 to $6,000 a week. But once they've purchased their retirement homes, some Baby Boomers are reluctant to rent them out.

Kathy Warburton of Holliston, Mass., says she and her husband have chosen not to rent out the house they bought in Orleans six years ago for their distant retirement "because it's in a private neighborhood, and we feel letting tourists in for short periods of time would be too disturbing for our neighbors. Besides, we love using it ourselves." It's still been a good investment, because comparable three-bedroom homes now sell for about $700,000, "and we could never afford one today," she says.

Preretirees who can't afford a second home at any price are moving to Cape Cod full time. According to the Cape Cod Commission, 14,500 of the Cape's 99,200 working residents commute off the Cape to work, a rate that's risen 50% since 1990. Drive times to Boston and other Massachusetts and Rhode Island cities average one hour each way, and that's in good weather, during nonpeak times. About 1,000 commuters take the bus to Boston and hundreds of others drive part way, then board a train for the rest of the trip. "It can be really exhausting," says Gretchen Elliott, who moved from Mansfield, Mass., to Sandwich five years ago with the idea of driving back to her old job. She lasted about 18 months, then sought work on the Cape. But professional jobs on Cape Cod are scarce and are concentrated in education, or in fields that cater to retirees, like doctors, nurses, physical therapists, nursing home administrators, etc. Most jobs are in the lower-paying service industries -- retail sales, food service and hospitality -- and often last only as long as the tourist season.

While Cape Cod has some of the highest-priced homes in Massachusetts, its household income levels are among the lowest, averaging $46,000 a year, compared with an average of $50,500 for the state as a whole. The low income levels, of course, reflect the high number of retirees -- in six of the Cape's towns, almost one-third of residents rely on pensions, Social Security, or other retirement incomes -- as well as low wages. Ironically, teachers, policemen and other public servants have to commute onto the Cape to work because they can't afford to live there.

But for those who can afford it, retiring on Cape Cod has many rewards. Keith Bradley, who moved to Chatham 10 years ago after a long publishing career in Manhattan, says residents there can enjoy cultural entertainment year round, thanks to groups like the Wellfleet Harbor Actors Theater and the Cape Symphony Orchestra.

Pricey Properties, Lower Taxes

Mr. Rafferty says that while food and home insurance tend to be more expensive on the Cape, real estate taxes are lower. "The people who have summer homes here are kind enough to pay taxes without demanding any services, like schools and year-round police protection," he says. Although the average value of a single family home in Chatham is $372,613, that village and its Cape Cod neighbors have some of the lowest real estate tax rates in Massachusetts.

That's one advantage that may not last. Cape Cod Commission research shows that 43% of Cape Cod homes were vacant during the winter in 1990; by the year 2000, that number had dropped to 36%. And many of those current winter vacancies are owned by retirees-in-waiting, like Arthur Hughes, a hardwood flooring contractor who lives and works in the Boston area. "My wife and I bought a condo in Osterville as an experiment, to see if we'd like living on the Cape full time," he says. "Now, we're house hunting there and would jump if we found the right place."

They almost have to. Ms. Kenny of Real Estate Associates says so many people are searching through Internet listings of Cape Cod homes that when a hot property comes on the market, it generates a bidding war. "I tell people to hurry down before prices go up even more," she says.

William McCann, vice president of GE Ion Track in Wilmington, Mass., says he grew up on the Cape and always dreamed of living there full time again, in a house with a beach. Last year, he spent four months looking at every piece of beach-front property from Bourne to Orleans before buying a lot in East Falmouth. "Ocean-front property is a limited resource," he says. "I was afraid that if I didn't act now, I'd never have the opportunity again."

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