Did the Real Estate Market Recover?
Although the average asking price in some of the largest cities across Puerto Rico is going up and even surpassing pre-Hurricane Maria levels, property values continue to lag in a few places
After taking a nosedive two years ago, the island’s real estate market seems to show some signs of stability and recovery.
At the end of 2017, Puerto Rico topped the list of countries with the biggest drop in housing prices in one year, according to a quarterly analysis by Global Properties Guide. Despite climbing 3.26 percent in 2016, prices sunk 9.59 percent in the first two quarters of 2017, even before Hurricane Maria pummeled the island.
Now, data gathered by Points2Homes shows that the average asking prices in some of the largest cities across the country are going up and, in some cases, even surpassing pre-hurricane levels. In general, Puerto Rico’s purchase-only house price index climbed 14.01 percent in the second quarter of 2019, compared to the same period in 2018. The house price index is a broad measure of the movement of single-family home prices in the United States and Puerto Rico.
For example, Dorado, a northern town 15 miles west from San Juan, experienced a 66 percent increase in asking prices, going from a $190,000 in 2018 to $315,000 this year. However, the housing prices in this municipality known for its upscale neighborhoods with golf courses and beaches are still below the $415,000 peak value of 2016.
In Humacao, another affluent destination on the eastern corner of the island, home prices jumped 39 percent compared to last year. Although prices went from $97,250 to $135,000, they are far below the $250,000 mark established in 2016.
Neighboring towns of Aguadilla and Isabela, on the northwest side of the island, experienced home gains of 26 and 23 percent respectively, while home prices in San Juan and Vega Baja surged by 20 percent. Other gains were more modest. Caguas, Fajardo, Bayamón, Carolina and Arecibo, for instance, witnessed increases of less than 10 percent.
Towns like Ponce, Isabela, Mayagüez, Rincón and Guayama surpassed 2016 prices.
The survey, which analyzed data from 20 municipalities, discovered that 15 of those towns experienced home price gains that fluctuated between 66 to 2 percent. In Río Grande, however, the value has remained practically unchanged since last year, clocking in at $125,000 and far below the $226,500 asking tag in 2016.
Cabo Rojo is one of only four cities where properties continued to depreciate, leading the way with a 14 percent drop. The other three towns, Guaynabo, Luquillo and Aguada, saw declines between 5 and 6 percent.
Although the study recognized that Puerto Rico “is still navigating uncharted waters”, amid a decade long economic depression and a bankruptcy-like process to manage its $70 billion-plus debt load, it identified some factors driving the increase in demand and the real estate appreciation rate.
“Americans and other foreigners looking for bargains on the island’s favorite tourist spots have pushed up demand, contributing to the recovery in the real estate sector. Coupled with the government’s financial measures, buyer and investor interest in Puerto Rican property managed to make a difference,” explained the Points2Homes survey.
Maria and the Housing Crisis
Last year, Points2Homes evaluated the impact of Hurricane Maria on the real estate sector and noted that the devasting storm aggravated an existing downward trend in home prices on the island, causing the value to drop by 15 percent. At the time, properties were worth almost half of their market value eight years prior. As a result, U.S. buyers’ interest in Puerto Rican real estate soared, the study found, with online searches for homes for sale peaking in the aftermath of the storm that caused an estimated $100 billion in damages and over 3,000 deaths.
The Center for Puerto Rican Studies at Hunter College also published the report “The Housing Crisis in Puerto Rico and the Impact of Hurricane Maria”, reaching similar conclusions. The authors, Jennifer Hinojosa and Edwin Meléndez, stated that the effects of the 2006–2016 economic crisis and the impact of Maria further depreciated the housing market causing many families to leave Puerto Rico, stay in their damaged homes, or move in with other family members.
According to the authors, Puerto Rico lost about 45,880 households but added 115,197 net housing units from 2005 to 2016. The difference between the increase in housing supply and the decrease in demand caused the median home value to decline across the island by at least 10 percent since 2005. The median household income also dropped 5 percent, from $21,458 in 2005 to $20,078, further aggravating the potential demand for housing.
“We believe it is possible to implement a housing program in which vacant units are converted into affordable housing to accommodate the families that lost their homes, and to mitigate the endemic challenge of widespread informal housing not built to code. The expected flow of federal assistance to reconstruct the island offers a unique opportunity to transfer vacant housing units to social purpose utilization,” indicated Hinojosa and Meléndez in the report’s introduction.