Undercurrents: V.I. Real Estate Market Continues Subdued Recovery

A regular Source column, Undercurrents explores issues, ideas and events developing beneath the surface in the Virgin Islands community.

Fears of a real estate free fall abated a couple of years ago, and while industry experts in the V.I. still cite areas of concern, they report that improvements in the overall market are continuing.

“I think it’s slowly getting a little bit better,” said Elissa Runyon, a longtime real estate appraiser on St. John. She said prices on the island are generally flat, but the volume of sales is up.

Julie San Martin, of Re/Max St. Croix, called the improvement “a kind of slow crawl upward.”

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“We’ve been in a buyer’s market for a long time,” said St. Thomas Realtor April Newland. “I think it’s shifting a little bit” and the numbers of sales are increasing.

San Martin shared figures from a report describing the past four years of sales in the first eight months of the year.

For both St. Thomas and St. Croix the trend was the same – a general increase over the four years with a one-year spike in 2014.

From January to August 2013, there were 46 residential sales on St. Thomas. For the same period in 2014, there were 67 sales. In 2015, the number was 54, and in 2016, the total sales volume was 74.

On St. Croix, for the same eight-months period, the figures were: 82 in 2013, 114 in 2014, 85 in 2015 and 117 in 2016.

Runyon provided MLS figures for St. John that told a similar story. From September 2013 to September 2014, the total number of houses sold was 41. In the same 12-month period from 2014 to 2015, the total was 36. And in the last 12 months, from September 2015 to now, the total is 50.

“Prices had softened in 2014,” San Martin said, explaining why the number of sales spiked in 2014.

She noted two segments of the market that are still weak. Prices on the west end of St. Croix will probably continue to drop for a while – just more of the fall-out from the closing of the Hess Oil Virgin Islands oil refinery in 2012.

And, she said, condominium sales have dropped because it’s more difficult than ever to get financing for a condominium.

“We’re down to maybe 40 percent of the condo market that you can get a mortgage on,” she said. More and more condo sales are either cash, or seller-financed.

She blamed increased regulations on the banking and financial industry, put in place by the federal legislation known as the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The last of its provisions took effect at the end of 2015.

If more than half the units in a condominium complex are rentals, if there is a rental agent on the property, if the complex is self-insured, if it doesn’t have officers and directors insurance, or if it doesn’t have at least 10 percent of its budget set aside for capital improvements, a buyer can’t obtain an FHA or HUD-backed loan.

Newland noted other concerns for the industry, including a dormant Real Estate Commission, and potential discrepancies in the stamp tax, but expressed optimism that the Mapp administration will correct them.

Last week, a contingent of “five or six” members of the St. Thomas Board of Realtors met with Gov. Kenneth Mapp about their concerns, she said.

“We got three hours of his time. He agreed to look into all of these things.”

The stamp tax is levied on the purchase price of a property or on its assessed value – whichever is higher, Newland said. The problem is that these days the assessed value can be considerably higher than the market value. She said she recently sold a property for $410,000, but the stamp tax was applied to the assessed value, $795,000.

Outstanding property taxes also can be a deterrent to sales. Newland said at the meeting one real estate agent reported that 13 years worth of property tax was outstanding on a property he recently handled.

“No wonder the government is struggling,” Newland said.

Concerning the Real Estate Commission, Newland said the governor wants to revive it, but the nomination process is onerous. Perspective members must fill out a 10-page form, provide their last two tax returns, get fingerprinted and go before the Legislature for confirmation hearings. 

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