A lot of big numbers are being thrown around the Virgin Islands, and that is a good thing. In March, FEMA announced that federal funding for disaster relief in the Virgin Islands had topped $1Billion. That is a pretty big number for a population of 120,000 - its $8333.33 per person. Then in April HUD announced $1.6 Billion more. Despite my cynicism for the government, it is without question that the federal response helped us in the wake of the 2 category five hurricanes; Getting the power restored and having a bulk of the trash and debris handled to name a few helpful tasks that were funded. But these funds have really not started to be spent here yet and some people and businesses are already nearly back to normal. That leaves the Virgin Islands in an amazing position to make some long coming large scale infrastructure and government level improvements that otherwise likely would not have occurred. Now, am I skeptical that the funds will be well managed? Of Course! The mis-use of public funds is the rule, not the exception. Again even with my most cynical eye on this, the affects will be very real and very visible.
How does this affect the Real Estate Market?
The real estate market has remained very active. 23 homes have sold since the storm between $225K and $2M. That is pretty healthy given the circumstances and not far below the same periods in previous years. (22 in the same period between 2014 and 2015, 29 for 2015-2016 and 33 for 2016-2017) . See the 23 sold homes HERE. There are also currently 15 homes under contract and preparing to close between $395K and $3.1M. See those homes HERE.
This activity is probably not based on the future of federal funds, but more on people taking advantage of the opportunities in the St John Real Estate marketplace.
Federal monies coming in can have nothing but an additional positive effect on the property values with new and improved infrastructure and the economic benefits of cash injection into a society. It seems that some buyers are either going to luck out with this, or they were savvy enough to see it coming. More likely, Buyers may simply have seen this is as the chance they have been waiting for with some slightly depressed values. The average sold price of homes is slightly down from 2017 when compared with 2018 Year to date. However, total volume and number of homes sold are on pace to be at or just above 2017 numbers. Sellers may also feel the same way with their chance to get out. I can state with confidence that showing traffic is way up. On one of our listings Bordeaux Gardens; We had over 40 showings in 30 days with 2 offers. That kind of traffic is unprecedented on St John.
The vacation rental market is filling in well with our homes operating pretty much at historic levels for this time of year. Of the 12 homes we manage, we have fully restored 11 of them and they are open for business as usual. In May we will enjoy about 75% occupancy. This feat was nothing short of heroic, with over 100 local people working on our projects at some times. We rebuilt roofs, walls, floors, repainted, refurnished, replanted and remodeled. The results are stunning and all of the properties feel new. The steady stream of rental guests is welcome and income is very real for homeowners who have recovered. One important takeaway I have from the rental market is that St John continues to have high integrity in the vacation rental product. Travelers seem to wonder and often ask if homes are open or functioning fully and it occurred to me that the marketplace has the same or higher integrity that it had before the storms. Simply, if a home is listed for rent on St John, I have very high confidence that it is in excellent condition and fully functional. Of course there are some self managed or friend managed AirBNB types of rentals that do not have the same level of care as professionally managed homes, but even amongst that group, I feel that the pressure of the marketplace created by professional management brings these rentals up in quality, cleanliness and service.
8 months later, insurance claims are starting to settle. About 70% of our clients have completed their insurance negotiations and have received their checks. These funds are also breathing life into St John’s Real Estate Market. Everywhere you go, you see homes being refit and put back together for the hungry vacation rental market. Older homes that likely would not have seen these kind of remodels are getting the makeovers they needed. Newer homes are taking the opportunity to improve on the lessons learned during construction.
We have spoken with the insurance industry leaders here in the Virgin Islands and also learned some very positive realities. About 7 years ago, windstorm insurance rates averaged about 2% of the replacement cost of a home. Over the last 7 years this rate has steadily declined to a territory wide average of 1.8%. The good news is, these insurance companies expect rates to simply return to the 2% level for now. In real terms, this number is pretty manageable and quells the fears many had about insurance going forward. For an example, take a home that sells for about $1M, the replacement cost would likely be about $750K. What that means is that last year you would have paid about $13,500 for an annual windstorm policy. This year, a new policy on that same home would be $15,000. No doubt, that is an increase, but its far less then what most of us feared, and those who simply renewed their policies in many cases saw no increase at all this year, even whilst collecting large settlement checks. Check out this Washington Post Article which sited Unique Island Assets as experts.
All told, we see opportunity, stability and improvements in the economic future of St John. We feel confident in the Vacation Rental marketplace and the insatiable commitment to St John from our visitors. We feel comfort from our federal government's oversight and funding. We feel relief that our insurance rates are not going to be attacked. Mostly we feel stronger and better despite the immense hardship we have endured.
Contact us anytime if you'd like to discuss any of these topics further.