Can it possibly still make sense to invest in residential real estate? Luxury homes? Resort properties? Haven’t prices for all these categories gone through the roof?

Consider Nantucket, where property values have increased 5% to 15% in each of the past 15 years. Last year, property sales there hit an all-time high of more than $1 billion, a figure that is likely to be surpassed this year. Can it get any better?

Ryan Wagner, who works for Windwalker Real Estate, thinks it can. He has done extensive analysis of real estate trends on the island, and projects gross returns over the next five years of 12% to 15%. (His work was based on land values, which offer a more homogeneous universe for comparison purposes. Also, he discounts any sizeable terrorist attacks.)

Why is he so optimistic? There are a number of compelling reasons. First, Nantucket property by definition is a limited resource. It is an island, and, significantly, more than 50% of it has been set aside by land banks and trusts, never to be developed.

Mr. Wagner cites a recent study commissioned by the Nantucket Community Association, in which the consultants conclude that most future building on Nantucket will come in the form of “secondary” dwellings – that is, extra houses on existing lots.

The reason for the expected growth in these secondary houses is that there are not many building sites for primary homes left on the island.

Another reason for Mr. Wagner’s optimism is demographic. Once again, the baby boomers are making things happen. They are retiring in ever greater numbers, enjoying (or suffering, depending on your attitude) empty nests, and looking for second homes, for which they now have the money and time to enjoy. Mr. Wagner cites a study by American Demographics Magazine (which we somehow missed) projecting a 56% rise in second-home ownership between 2001 and 2010.

Various factors are attracting wealthy boomers to Nantucket. The ability to work full- or part-time while on the island has certainly been enhanced by the Internet. Numerous money managers, for example, are in residence for the entire summer, easily working from high-speed homes (and the golf course).

Transportation to and from the island has been made far easier for this lucky group by the explosion in fractional ownership of private jets, reportedly making Nantucket the second busiest airport in New England. Private plane visits were up 47% last year alone.

Finally, the development of a new golf course in the past several years eliminated the final hurdle. Before the advent of Nantucket Golf Club, golfers new to the island had to hope to ultimately join the Sankaty Head Club, which had an impossible waiting list, or play at a pleasant but not spectacular public course. For the group buying at the high end, neither waiting nor going second-class is an option.

So how is the market today? According to J. Pepper Frazier, founder of the eponymous firm, “The high end of the market is incredibly strong. The strongest segment is big houses.” Indeed, real estate sales (including commercial properties) through July reached $616.6 million, 23% more than last year’s total. The average price of a Nantucket home this year was $1.926 million, up 15% from $1.672 million in 2004.

Still, a co-principal of Denby Real Estate, H. Flint Ranney, sounds a note of caution.

In his most recent real estate report, he points out that closings are occurring at 93% of asking prices, down from 95% earlier in the year.

Also, he says rentals have been soft this season. When asked the reason, Mr. Ranney recounts a familiar Nantucket lament – the island is extremely expensive. “Dinner out for a family of four used to be $100,” he notes. “Now it’s $250.The cost of everything has gone up.”

Mr. Ranney also could have mentioned that gasoline costs more than $3.15 per gallon, which may have caused some softening in ferry traffic to the island.

Nonetheless, those who aren’t worried about costs are still piling in. Last year, 76 homes sold for more than $3 million, more than double the level of 2000. Of those, 22 sold for in excess of $6 million.

At the moment, there are six homes on the market for between $15 million and $20 million. One is in the coveted Monomoy area, with harbor views and close to town, with an asking price of more than $19 million. What does the buyer get for that astronomical figure? A nice five-bedroom house, less than four acres, a swimming pool, and, most unusually, a dock. There is a moratorium on new dock construction on the island, so a premium is warranted.

A swimming pool? Longtime Nantucketers would scoff. With miles of gorgeous white sand beaches available, who needs a swimming pool? As Mr. Frazier nicely concludes, “At this juncture in history, people are spoiled.” No kidding.