Roller Coaster Real Estate Market Begins to Level Off

The V.I. real estate market is strong, but home sales that soared in the past two to three years are starting to come down to earth. (Shutterstock image)

It was an up-and-down ride for Virgin Islands residential real estate the past dozen years, with sales reaching super heights in the early 2020s. Now sales are slowing slightly and some stakeholders worry that restrictive property insurance will lead to a small dip.

“2021 was absolutely the best year that I ever had, and 2022 was very close behind that,” said Amy Land-de Wilde. Now an associate broker with Coldwell Banker St. Croix Realty, she’s been selling real estate on St. Croix since 1986.

“Our boom started at the beginning of COVID,” said Sharon Hupprich of Calypso Realty Company. She, too, is a veteran V.I. real estate agent; she’s been selling St. Thomas properties since 1984.

“The last three years were a very, very high market” on St. John, too, according to Yelena Rogers, a realtor with Cruz Bay Realty for the past five years.

When the world essentially shut down in the spring of 2020 and U.S. workers started working remotely, many also started dreaming of tropical isles. Then the USVI reopened to visitors months to years before some other Caribbean locales.

“I definitely think we got sales from that,” Land-de Wilde said. Tourists who couldn’t get into other destinations came instead to St. Croix, or St. John or St. Thomas. “People hadn’t been exposed to us before.” Now that they were, and they liked what they saw, they spread the word. “It had a halo effect.”

Add to that low mortgage interest rates hovering then around three percent, and there was a lot of incentive to buy.

She and Hupprich were skeptical of a report released by the U.S. Census Bureau late last month, which said that the median home value in the Virgin Islands was $290,600 as of 2020, a figure they argued was far too low.

The median is the halfway mark in a set of numbers, suggesting that half the homes in the territory were valued at more than $290,600 and half were valued at less.

Since the bureau was releasing data gleaned from the 2020 survey of residents, presumably, the home values reflect the judgments of those residents and would include not only recently acquired homes but also long-held properties.

Home values in the Virgin Islands have traditionally been higher than in the other three small island U.S. territories, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands. While that was still the case, according to the 2020 census, the other island territories were starting to catch up.

According to the Census Bureau, values in the Northern Marianas increased by almost 49 percent in the decade between 2010 and 2020. Values in Guam rose 28.6 percent in the same time period, and in American Samoa, the increase was 23.8 percent. In contrast, the V.I. values rose only 14.3 percent (from $254,300 in 2010 to $290,600 in 2020), a percentage increase that is close to the U.S. inflation rate for the same period.

According to the Bureau of Labor Statistics Consumer Price Index, inflation was 1.73 percent per year from 2010 to 2020, making the cumulative rate for the 10-year period 15.75 percent.

So, adjusted for inflation, the medium value of a home in the Virgin Islands was pretty much the same in 2020 as it was in 2010, according to the Census Bureau.

But that does not mean that prices were steady throughout that decade.

“In 2010, we were still climbing up from (the downturn of ) 2008,” Land-de Wilde said.

Then, in 2012, St. Croix’s oil refinery closed, throwing thousands of people out of work and prompting a mass exodus that left behind a lot of empty homes to overload the supply side of the market.

“That was really the pits,” she said. “We probably had more house and condo listings than I’ve ever seen.”

In 2016, the refinery reopened on a smaller scale. That didn’t affect the market very much, Land-de Wilde said, but in 2017 hurricanes Irma and Maria struck, turning the islands upside down.

Soon recovery workers flooded in. “Our rental market just went bonkers during that time,” she said.

Three years later, enter COVID and the sharp upward turn.

Land-de Wilde offered to look up actual sales in the territory since 2010.

“Our research turns up, according to MLS stats, that the median sales price when averaging all three islands was $340,000 for the period of 1/1/2010-12/31/2020,” Land-de Wilde wrote in a follow-up email. “St. Croix was $285,000; St. Thomas was $450,000 and St. John was $550,000.”

Then, prices and sales shot up.

For 2021 through July of 2023, the median sales price for homes in the territory was $561,500, she said. She did not have individual sales totals for St. John, but on St. Croix, the median price of homes sold in the period was $472,000, and on St. Thomas, it was $750,000.

“This is in line with our experience of the market regarding the rising prices since 2020,” Land-de Wilde said.

Rogers did not have median prices, but she was able to provide some figures for St. John – long the high end of the V.I. market – that reflect a similar boom in the same timeframe.

Although it is the smallest of the three main islands and roughly two-thirds of it belongs to the National Park, St. John logged $205 million worth of home sales in 2021, according to Rogers. In 2022, the total was $125 million. So far this year, the figure is $62 million and counting.

It’s not only prices that went up. Volume is increasing too. In 2010, just 20 homes on St. John were sold, Rogers said. There have already been 35 homes sold this year.

“The market is still very strong on St. John,” Rogers said. “It’s slowing a little bit but not a whole lot.”

Industry experts said sales and prices are still healthy on St. Thomas and St. Croix too, but Land-de Wilde indicated that an overheated market is cooling down.

“Everyone got used to this bubble market,” she said. Things have “really slowed dramatically,” starting at the end of 2022.

There are a lot of factors at play.

Interest rates have risen to more typical levels, and “you can count on paying a bit over seven percent on a 30-year fixed mortgage for a primary residence right now,” Land-de Wilde said. “The number of points will vary on other criteria including credit worthiness.”

There’s a “domino effect” of a slowing market stateside market, Rogers said. It’s left off-islanders with less ready cash to invest in an island home.

Then too, the St. John market is a victim of its own success, she suggested. Having sold so much in the last three years, it has depleted the inventory it can offer.

Perhaps the biggest and certainly the most worrisome drag on sales currently is the lack of easy access to affordable property insurance.

“Insurance is in crisis right now,” Hupprich said. “It’s largely unavailable,” and if you can find it at all, “the pricing is ridiculous. . . Some of them have gone up 30 and 40 percent.”

She traced the first hints of the problem to January or February of this year but said it hit “in earnest” by April.

Companies have all but stopped insuring wooden and mixed material buildings on the premise that they are less likely to withstand wind storms, Hupprich said, an assumption she challenges. “There really isn’t any compelling data” on it, she said.

“It’s true that we’re not seeing the availability that we saw previously,” Land-de Wilde said. “If your home is anything but concrete, it is very, very unlikely that you will be able to get insurance, so that does affect sales because it affects the ability to get insurance, which is mandatory if you are getting a bank loan.

“We have a wood house listing, very well-built with excellent storm experience, which price has been reduced significantly because that house needs a cash buyer. It’s a tremendous investment opportunity and has a spectacular view, but someone will need to pay cash and be self-insured until capacity reopens,” she said.

Just when and how insurance capacity will improve is not clear. Local government officials are aware of the problem and are working to resolve it. Meanwhile, Land-de Wilde said, “Insurance professionals are telling us that they’re hoping that capacity will free up next year.”

Meanwhile, it’s giving some folks the jitters.

“The market is strong. Buyers are there,” Hupprich said. “How long is this gonna last? I’m really not sure.”

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