Step 2 –“Insurance is a Dirty Word” - Windstorm (Hurricane) insurance is an unpleasant product to buy. It’s bank required so if you have a loan, you probably have it. It’s expensive, running at three or more percent of replacement cost with very high deductibles (5-10% of replacement cost). Often people don’t insure for loss of use or loss of business in the case of rentals. In addition, people don’t insure “other structures” like fences, electrical monuments, car ports, garages etc. This leaves the insured technically underinsured and most owners short on cash for recovery. When claims get settled, many owners will simply look at those numbers and then call their realtor to get out. This second phase market will be busy and is where most of the hurricane transactions will take place. Buyers will cash in on great deals for their new “projects”.
Step 3 – “Company Town” – St John is now in a housing crisis! Homes that once were vacation rentals are now occupied by as many as 15 relief workers. Soon though, the relief workers will leave and the construction crews will arrive. Where will they all live? The island’s housing economy will have to adjust to recover, but vacation villas are unlikely to get involved in long-term rentals. Contractors will be forced to buy or rent employee housing to be able to get anything done. The already weary manpower pool will only dwindle if we cannot house them comfortably. Homes that can immediately provide housing will collect big on this and savvy buyers will capitalize on long term housing first with vacation rental goals in the long term.
Step 4 – “Flip Flop” – Flipping homes is one of those things that sounds like gold coins dropping in the bank to the novice Real Estate Investor. It looks easy, and for many people in the States, it may be. On St John, it’s another matter. On St John, flipping a home is no (johnny)cake walk and experienced investors on island will tell you, there is no cheap way to do it. There will be plenty of people looking for deals on project homes. They will pour their life into it. They will write a blog about it. Then they will add it up and list it for sale on the market for more then their broker suggests. This could clog the market with inventory.
Step 5 – “Chiropractor Visit” - It’s time to adjust! An embattled real estate market and a hurricane are a recipe for adjustment. I have been pacing back and forth trying to calculate the complicated web of economic effects on the micro real estate market that is St John. Here are my adjustment predictions
· Land – land sales will increase with values remaining stable or increasing from pre-storm values. The only real effect this storm had on Land is that it did some of the excavating and land clearing for you. Now you can see the view that Realtors have been telling you about and trying to sell you all these years. Yes, it was always there!!
· Unrepaired Damaged Homes – Damaged homes sadly will have damaged values. Simply, it will be hard to recoup the inflated price point that some poorly constructed homes once had, and those that were well constructed but must be sold damaged now come with a scar that will be hard to shake from the record for a long time.
· Repaired Homes – These homes will be slow to come to the market. Many of them will come on with inflated prices. Read your seller’s disclosure forms well buyers! Homes that are built to withstand will have value. Those pieced back together will remain stagnant.
· Un-Affected Homes – Homes that escaped relatively unscathed will see an immediate drop in activity. It is unlikely buyers right now are thinking about buying a full price home, but they should be. In time, these homes will boast their resilience to Irma and Maria and will come out ahead. Masonry homes with rafters poured into walls, back up(i.e. full time) generators, and quality shuttering systems will reign the marketplace when the Market recovers. These will champion the final stage of the recovery and define the new value of St John. Buyers would be wise to consider these homes while demand for them is low.
Looking to get in on the action? Look to your savings not to your lender. Cash deals are king right now and lending will be a challenge especially with the unknown insurance realities, which are fast approaching. Search the MLS here as listings get updated with new info about post storm conditions.
CONTACT USto talk about your real estate goals and see if you can find the deal you have been waiting for.