Real Estate

Not huge gains, no. Certainly not what I'd like to see but I'm not a realtor. I do watch what's going on though. I hope a STT realtor will check in.

Real estate in the VI particularly STT showed a significant increase in value over the past few years. STX was slower to follow, but now has effectively sold out it's basic inventory. There are now very few properties for sale under $300,000. Those under are usually properties that are not too desirable. The real estate bubble that has burst in most of suburban America is less obvious here. The number of risky loans was less here than in the states, so the number of defaults is less.

It is my perception that real estate sales right now are flat in the VI , not necessarily declining ( an honest Realtor could give us those numbers). Prices here are driven by off island investors and the weather. Many retiring statesiders have been acquiring property here in the past few years and there have been no major hurricanes, so prices are up. Things can always change, but the demand so far continues.

On STX, our extremely limited inventory keeps the prices rising. We do not have developers turning out lots of new construction. St. Croix has seen a slow-down in sales since June, partly because 2007 was predicted to be a bad hurricane season and partly because many of the wannabe-buyers have to sell something on the mainland before they can purchase a property here. In that way, the mainland slump does have an effect on our market to some degree. The USVI has never had the zero down, low-interest refi loans with introductory teaser rates that eventually climb and price people out of their homes. There is very little loan default in the islands. Most island natives build their own homes without hiring a contractor or taking out a mortgage and very few mortgages allow for less than a 10% down payment.

Real estate numbers for STX:
2006
236 new listings for houses
188 house sale transactions closed

275 new listings for condos
162 condo sale transactions closed

515 new listings for vacant land
431 land sale transactions closed

61 new listings for commercial properties/business opportunities
18 commercial property transactions closed

2007
322 new listings for houses
173 house sale transactions closed

230 new listings for condos
88 condo sale transactions closed

464 new listings for vacant land
251 land sale transactions closed

61 new listings for commercial properties/business opportunities
31 commercial property transactions closed

So the number of houses selling is pretty stable, but the condo and land figures have been cut in half while the business sales have doubled. Prices, in general, are still rising slowly rather than with the blinding speed they did in 2005.

Condo sales went crazy in 2004 through 2006. There were 116 sales in 2002, 140 sales in 2003, 185 sales in 2004, and 208 sales in 2005. (162 in 2006 and just 88 in 2007.) Through the period of increasing sales, the prices doubled and tripled at most complexes, which accounts a lot for why the figures declined so dramatically in 2007. Condos used to be very affordable, but now buyers can often purchase a house for the same monthly expense as buying a condo and paying the monthly HOA fees. At a couple of complexes, many condo owners tried to get in on the escalating prices and put their units on the market... all at the same time. The unexpected glut brought sales at those complexes (St. C's and Mill Harbor are notable examples) to a screeching halt as buyers feel no urgency to make a selection when they have a dozen to choose from and some also wonder if there is something wrong with a complex for there to be so many properties listed. The condo sales successes of 2003-2006 resulted in the condo sales crash of 2007. There are many great condos currently listed that would have flown off the shelf in recent years but are currently languishing on the market.

I will leave a STT analysis to a STT Realtor.

Very helpful, thank you for all the details.

I have been watching the market in STT for the last 3 years and it is definetly leveled off. We bought last year and had alot more choices than we had just a year earlier. Alexandria's insight is always spot on and I always look forward to her post.
Good Luck

Alexandra:

While it is true you can live in a simple house for less than a condominium particularly if you are willing and capable of doing all your own exterior maintenance, yard work and pool work if you have one. Most people who have never owned a home in the tropics have no idea how much time and money are necessary to maintain a property here.

Also while some condos on STX have monthly fees of a thousand dollars or more, many basic condos on STX have fees that are much less: Bay Gardens $300, Club STX $300- 550, Coral Princess $315, Cruzan Princess $400 - $500, Fort Augusta $175 - $250, Good Hope $215, etc. Generally you get what you pay for. The condos with higher fees have nicer locations, and more amenities such as pools, beaches, tennis courts, golf courses, security, stand by generators, desalination plants, adequate insurance, on site management, etc.

Condo associations are non profit. They only deliver the services that the members collectively decide they want. The monthly fees are the cost of these services.

Jim

Jim - that is certainly all certainly true. It is still also true that since condo prices have doubled and tripled or even quadrupled in some cases, they have become less of a deal than they were just a few years ago when the low prices astonished buyers from the mainland who checked into our real estate prices while on vacation and couldn't resist making a purchase.

One of the issues with some of the associations with lower condo fees is that many do not carry Hurricane coverage. In that case, it is harder for buyers to buy a unit at those complexes if they don't make a cash purchase. If they need a mortgage, they then also have to pay for an additional insurance policy that brings their monthly payment up to the same amount as if they had bought at a complex with full insurance and high HOA fees, yet they don't get the same level of security that the complex would be rebuilt in the event of a hurricane. Those add-on insurance policies are designed to protect the mortgage company, not so much the buyer.

The beauty of a condo is that someone else handles the maintenance of the buildings and grounds, leaving the occupants free to enjoy their lives without using their weekends to mow the lawn, etc. This is especially appealing to retirees and some families with small children. The retirees can sometimes pull the cash together to buy a self-insured condo without needing a mortgage. A family with small children is less likely to have those financial resources. Many retirees still can't afford the risk of losing their investment should the complex be demolished in a hurricane. For these reasons and others, buyers need to be well-informed and think through all the ramifications before pursuing condos at complexes that "self-insure" for hurricane and wind damage. The low HOA fees are attractive, but they don't tell the whole story.

But low condo fees don't necessarily mean the association doesn't have hurricane AND earthquake insurance. Ours definitely does. It's also most important to ask about the history of assessment fees. It's no good to have low monthly fees if you get hit with a ton of high assessments.

I think that the market has slowed down a bit. There are very few homes available for 300000 or less that you would ant to live in. Condo sales are still slow but at Crystal Cove, were we have two units, things increased last year and are now around 300 or so. The mtc fees are about 700/month. And we are self insured so that limits who can buy them as most mortage companies wantt proof of insurance.

Good luck

biid

Alexandra:

As I said previously you have to do your analysis when you buy a property and decide what is important to you and what you can afford.

While it may seem that HOA fees for condos are high a buyer needs to know what is included. If you are comparing the cost of a condo vs. a single family home then you need to know what the real costs of maintaining a single family home on STX are. For instance the cost for electricity to run a pool's pumps is at least $12 per day and if you have a pool service company it will cost you $500 or more per month for two visits per week.

Landscape maintenance for 52 weeks a year is also expensive.

While you can do some of the work yourself in a single family home how much is your free time worth to you?

It is not unusual for single family homeowners to pay $5,000 - $10,000 or more for property insurance. Insurance bought in bulk by a HOA can be cheaper.

If you divide the costs of property ownership and maintenance over 50 - 100 owners a condo can be more economical than a single family home given the economies of scale.

Property on STX is not as cheap as it once was. While the value of my condo has doubled so has the cost of most single family homes. While it might cost $400 K to buy a nice condo in 2008 a house with similar amenities probably would cost over $1 million. Property of all types was cheap on STX five years ago compared to Florida or other beach front property in warm climates. That is no longer the case. Each type of ownership has its advantages and disadvantages and the economic issues are only part of the difference.

What I object to is people saying that HOA fees are to high without doing a detailed analysis of the costs and advantages. Having served on the boards of three condo associations and having owned several single family homes I understand what the costs of ownership really are in the VI.

Jim

I have been checking the MLS for a number of years now, for St. Thomas, and seems like the homes on the MLS have been there for many months, also there seems to be very few new homes added in the last few months. My question is, is there more homes on the market that are available to people who are actually on the island, or is this selection on MLS all there really is?
Thank you.

Not much more then you see. There might be another 5% or so that try to sell it themselves and are therefore not on the MLS (these people usually break down and give it to a realtor to sell).

The locals usually keep their houses in the family, and just pass it on. They build their house as they have money, so when you get here you will see many houses that are just starting out or half way done. They build as they have money instead of going into debt. It may take a two or three years or it may take several decades, but it eventually gets done (usually). I personally would rather be shot then go through the headache of building here but everyone had there own idea of a good time. Just buying a fixer upper has been enough headache for me.

So to answer your question there is never that much on the market except maybe after a hurricane. These are very small islands, so even when its a buyers market its not really.....you just have to wait your turn to get sold.

Thank you for the response. I am glad you brought up the topic of buying a "fixer upper". That is eventually what I want to do in St. Thomas. I recently bought a home in the north east and ripped it down to the 2X4's. I was wondering how the USVI is with home repairs. Is it required to take out permits for every project you do on your home, like the roof or adding a deck? Does the relaxed attitude of the USVI extend to people being able to make home improvements without the interference of an inspector. In the north east everything required a permit, and if you didn't get one, you could count on one of the neighbors reporting you. Thoughts please.