St. Croix real estate market update March 15, 2013

 

By: Chris Hanley, Broker

This report is to compare 2011 sales activity with 2012 sales activity, and 2007 with 2012. This report includes the property types of residential, condominiums, and land. As commercial property sales are minimal those statistics are generally skewed and not useful. This information is obtained from the local multiple listing Service (MLS), and includes the sales of all brokerages, not just USVI Sotheby’s International Realty sales data.

 

The St. Croix real estate market peaked in the later part of 2007. Since then there has been a relatively steady decline in real estate sales and in real estate values. It is my opinion however that the St. Croix real estate market has bottomed out, or will soon. The effects of closing of the oil refinery last year created a temporary double dip in our market in the first half of 2012. The market has now discounted this effect and it is my opinion that the values of today are taking that into consideration. In 2011 there were 237 sales, in 2012 there were 179 sales, a change of -24.5%. The dollar volume of sold listings was off by a similar percentage. Dollar volume is the sum of all sales prices added together. In 2011 there was $62,442,775 in sales, in 2012 there was $46,117,952 in sales, a difference of -26.2%.

 

It is too early in 2013 to make any confident determination as to whether or not this downward trend continues. Based on my experience and gut feeling I believe there could be a bit more downward trending but the bottom, if not here, is very close.

 

Looking at a broader timeframe, comparing 2007 sales activity with 2012 sales activity, we get a good picture of where we’ve come since the peak. In 2007 there were 529 sales while in 2012 there were 179, a difference of -66.2%. And similarly the dollar volume of sales dropped from $126,310,963 to $46,117,952, a difference of -63.5%. Obviously this is a drastic decline not unlike what we see in other resort markets such as Las Vegas, Florida, and in areas of California. Generally real estate nationwide has been off by about 50%, our drop of more like 66% I believe was a result of the double dip caused by the refinery closure, with the approximate 16% differential being attributable to disclosure.

 

Fortunately we are now seeing a rise in the number of ready willing and able buyers entering the marketplace. When a property is correctly priced, there is a buyer who is ready to purchase. Property owners are always reluctant to reduce their price to market level when the market is declining, not the case when the market is increasing. But when a property owner sets the price at current market levels, the property sells. Unfortunately the lending environment is not cooperating. Banks are reluctant to lend at these historically low interest rates and the appraisal process has become a nightmare. In 2007 a buyer could have a mortgage commitment within 30 days, today it takes sometimes 90 days and that is only if the buyer has perfect credit, excellent income and the cash needed for down payment. So the recovery of the real estate market will continue to be hampered by the uncooperative lending institutions and cumbersome nature of the lending and appraisal industries. Hopefully this problem will be resolved in the near future, so that we can see a quicker strengthening of real estate sales.