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The Cape and Islands housing market: Overpriced, undervalued, or overdue?

Are the skyrocketing home prices in Barnstable, Dukes, and Nantucket counties a product of pandemic migration or just a long overdue course correction?

If you dream of owning a summer home on Cape Cod, you’ll want to pack more than sunscreen and towels in your beach bag. Like maybe an extra $130,000.

The median price of a single-family home sold in Barnstable County through June of this year was $550,000, according to The Warren Group, a real estate analytics firm. That’s an eye-popping 30.2 percent jump from the first half of 2020, when the typical Cape house sold for $422,500.

Single-family prices on Martha’s Vineyard, already spiking by this time last year, have shot up 52 percent in two years: from $712,500 in the first six months of 2019 to $1,082,500 so far this year. On Nantucket, the median-priced house now costs nearly $2 million, according to The Warren Group.

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Those lightning-fast price hikes are the result of two clashing realities: The pandemic spurred and enabled a widespread desire to live and work from somewhere beautiful, like the Cape and Islands. But the dearth of homes for sale there couldn’t accommodate the surge in home buyers.

“You could count the number of homes available in certain towns and villages on one hand for a while,” said Greg Kiely, managing broker at Sotheby’s International Realty in Osterville. “When you think about a normal year on Cape Cod, there should be between 2,000 and 3,000 homes available at any given time. We got down below 500.”

Typical for July and August, the Cape and Islands market has calmed somewhat as house hunters take a break to enjoy their summer. Agents are seeing fewer offers per property now, said Ryan Castle, chief executive of the Cape Cod & Islands Association of Realtors. “Folks are reporting that two, three, four months ago, they were getting 13 to 14 offers ... and now they’re getting three or four,” Castle said. But the dip in demand may be partly due to the disheartening lack of homes for sale, he added. “We did see the lowest amount of new listings in June that we’ve seen in at least 18 years.”

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It seems nothing will deter Cape buyers — not a surprising COVID outbreak among vaccinated Provincetown revelers, not even tales of a lobster diver being spit out by a whale, nor the shark attacks and sightings of recent years. If sharks were a concern for buyers, towns on the lower and outer Cape would be the ones feeling it most, Kiely added, “and yet Chatham has seen the hottest, hot-hot-hot real estate market of them all right now.”

Through June, the median price of a Chatham single-family was just shy of a million dollars ($999,000), a remarkable 43.1 percent gain over the first half of last year. And in Orleans, the year-to-date median price of a single-family home jumped an incredible 49 percent since the first half of 2019, from $577,500 to $862,500.

Was it long overdue?

Yet even after the meteoric price gains of the past year-plus, home values on the Cape and Islands still haven’t risen as fast as those in the Boston area in the past decade. In fact, one could almost argue that the Cape’s current housing boom was somewhat overdue.

Consider some recent home price history in three Massachusetts counties. Back in 2005, the median price of a single-family home in Suffolk County, which includes Boston, was $380,000, according to The Warren Group. In Essex County, which comprises most of the North Shore and Merrimack Valley, it was $385,000. And in Barnstable County — i.e., Cape Cod — the median house sold for $390,000.

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That year represented the previous peak in the Massachusetts real estate market; prices would waver in 2006 and 2007, then sink in 2008 and 2009. By the end of 2011, median house prices in all three counties were within $3,000 of one another: $314,000 in Suffolk County, $312,500 in Essex, and $315,000 on the Cape.

Then, our current real estate boom began. Boston home prices rebounded the fastest — as early as 2014, the median home price in Suffolk County had topped $400,000. Essex County would surpass its previous peak two years later, in 2016. But it would take still another two years before Barnstable County home prices regained their 2005 levels (and another two years — not until 2020 — before Nantucket topped its 2007 peak). “If you were selling a [Cape] house in 2017,” Kiely said, “you were still five or six percent below the heights prerecession.”

By the start of 2020, single-family prices had nearly doubled in Suffolk County, up 97 percent from 2011. In Essex County, prices were up 66 percent. But in Barnstable County, prices had risen only 51 percent, lagging even the statewide average (56 percent). It raises the question: Was Cape Cod real estate actually undervalued prior to the pandemic? Was the explosive price growth of the past year-plus actually more of a market correction?

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“I wouldn’t use the words ‘over-’ or ‘undervalued,’ ” said Daryl Fairweather, chief economist at national brokerage Redfin. She believes home prices on the Cape and other vacation areas were appropriately valued — for a pre-pandemic society. “Most people didn’t have the vacation time or the ability to work remotely to really enjoy local vacation towns as much as they may have wanted to,” Fairweather said. “The pandemic definitely shifted that, with remote work becoming normalized . . . I don’t think that this would have happened without the pandemic.”

In fact, the accelerated increase of metro Boston home values probably played a part in the Cape’s current boom. A lot of vacation home buyers rely on rising property values — and the home equity that creates — to afford their second home. “If you think housing on the Cape is expensive, go to where the buyers come from,” Castle said. “If you’re in Newton or Wellesley and you’ve owned your house for 10, 12, 15 years, you have a lot of equity,” he said, “[and] you can go buy a second home.”

In addition to the traditional seasonal visitors and year-round residents, the pandemic brought a third group of home buyers to the Cape, Kiely said: People who were seeking a serene retreat in which to hunker down. “And those buyers seem to still be keeping their houses — we haven’t seen the rebound sales,” Kiely said. They’re also looking for a more refined lifestyle than the traditional rusticism of a Cape Cod summer. “There’s definitely a demand for more modern amenities, and that’s not only in the housing, that’s in the restaurants and the shops and the activities as well. You’re seeing the culture of Cape Cod evolve before our eyes here.”

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Some of those buyers may not have wanted to give up their primary residence amid the uncertainty of the pandemic, but may now be ready to do so, Fairweather said. “Now that people are getting more clarity about how they’ll be able to work remotely, people are more likely to make a permanent move or to make their second home their permanent home.”

The impact of climate change

The Cape Cod Commission, Barnstable County’s regional planning authority, is collecting survey data from new homeowners to get a clearer sense of their near- and long-term goals. “That will give us a better sense of whether they plan to stay here year-round, whether they plan to use the services of the communities, enroll their children in schools, and whether or not we need to potentially invest more in infrastructure,” said executive director Kristy Senatori.

With 550-plus miles of coastline, the Cape is particularly vulnerable to rising sea levels and other impacts of climate change. At the same time, year-round residents and seasonal workers are getting squeezed out of the housing market. Senatori hopes portions of the commission’s first-ever Climate Action Plan, approved in July, can help address both crises at once — like a focus on building more multifamily housing in dense, walkable village centers.

“We lack a diversity of housing types here on the Cape — over 80 percent of our homes in the region are single-family homes,” Senatori said. “So we wanted to identify areas that could not only contribute to the walkable nature of the community to help combat climate change, but could also really help to address our housing crisis simultaneously.”

While some Cape Cod home buyers express concern about the impacts of climate change (buyers can consult capecodcoast.org to get a sense of a home’s vulnerability to climate risks), Kiely said there’s comfort knowing the region takes the issue seriously. “The communities down here are all laser-focused on climate change and waste-water problems and the environment,” he said.

For buyers still hoping to purchase a piece of paradise, Kiely said the market is more forgiving now than it was a few months ago. “Buyers who were looking before Memorial Day actually have more of an opportunity today than they did in May,” he said. “For every property that’s selling in the blink of an eye, there’s a property that’s absolutely not.” What’s more, he said, an influx of new listings should hit the market right after Labor Day — and he’s interested to see whether they’re greeted by the same level of demand.

“That’s going to really set the tone for 2022.”

Jon Gorey blogs about homes at HouseandHammer.com. Send comments to jongorey@gmail.com. Follow him on Twitter at @jongorey. Subscribe to our free real estate newsletter at pages.email.bostonglobe.com/AddressSignUp. Follow us on Facebook, LinkedIn, Instagram, and Twitter @globehomes.