Although Puerto Rico’s economy is still in the mire, the island’s housing market seems to be on the path to recovery. With some exceptions, average home prices in the biggest cities are going up and, in some cases, are even surpassing pre-hurricane levels.
Americans looking for bargains – as well as other investors moving in to scoop up distressed or foreclosed properties – have had a positive influence on the real estate market, helping in no small way with the island’s recovery. The bulk of the help, however, came from several governmental initiatives – including new tax incentives and other housing stimulus measures, as well as federal aid and insurance money – all intended to revive the economy.
To follow up on a study from 2018 and to take a closer look at Puerto Rico’s current housing market, Point2 Homes zoomed in on the real estate asking prices in some of the largest Puerto Rican cities. While four cities remained on the downward course they started on more than a decade ago, 15 markets in the analysis witnessed home price appreciation.
Here are the study’s main highlights:
- Puerto Rico’s seasonally-adjusted, purchase-only house price index climbed 14.01% in Q2 of 2019, compared to the same period in 2018.
- Dorado – an upscale tourist destination deeply affected by the recession and the 2017 hurricane – also witnessed the most spectacular come-back; the town experienced a 66% increase in asking prices, going from a modest $190,000 in 2018 to $315,000 this year.
- Runner-up Humacao, another well-known tourist destination, saw its home prices jump 39% compared to last year.
- Ponce, Aguadilla, and Isabela all noted home price increases greater than 20%.
- Cabo Rojo is one of only four cities where properties continued to depreciate, leading the way with a disheartening 14% drop.
- Although home prices in Aguada went up slightly in the post-hurricane Maria period, they declined by 6% in 2019.
- Luquillo and Guaynabo, on the other hand, stayed the course – listing prices in these markets were driven down by the volatile economy, with the hurricane adding to their distress.
Puerto Rico Rocked by Recession, Natural Disaster & Political Crisis
In September 2017, the catastrophic, category 4 Hurricane Maria tore its way through Puerto Rico, laying waste to the island’s streets, homes, and businesses – big and small. But, despite its singularly destructive consequences, this event was merely the final straw in a series of terrible events plaguing the lush island.
In what was called an “extraordinary measure”, just a few months before the hurricane struck, Puerto Rico was finally allowed to declare a form of bankruptcy in May 2017, after the commonwealth’s governor declared the island’s $123 billion debt unpayable. The territory had been in the grip of a bitter recession since 2006, and the hurricane threw a real wrench in its attempts at restructuring and recovery.
Some estimates put the damage created by Maria at around $90 billion, of which housing represents the lion’s share: $37 billion. One terrible consequence of this natural disaster was that home prices, which were already in a freefall, took an additional hit; almost immediately, the hurricane sliced off an additional 15% of the average home price.
According to a study by the Center for Puerto Rican Studies:
The effects of the 2006–2016 economic crisis and the impact of Hurricane Maria (2017) further depreciated Puerto Rico’s housing market […]. Perhaps the clearest indicator of the housing crisis is that pre-Hurricane Maria, Puerto Rico lost about 45,880 households while adding 115,197 net housing units from 2005 to 2016. Because of this clear imbalance between the increase in the supply of housing and a sharp decline in demand for housing, Puerto Rico’s median home values have declined across the island […].
Puerto Rico Housing Market Improving Despite Economic Turmoil
Although Puerto Rico is still navigating uncharted waters, given that it is the first state in history to seek out bankruptcy-like relief, there is one notable factor pointing to improvement: home price appreciation. 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.
At a national level, the change is barely noticeable (1%), but individual markets like Ponce, Isabela, Mayaguez, Rincon, and Guayama have seen their average home prices surpass pre-hurricane levels. Property prices, fueled by slowly rising demand, are pointing to a recovering market.
Compared to 2018, asking prices in seven cities noted increases of 20% and even higher, with prices in Humacao and Dorado really shooting up – by 39% and 66% respectively. Rio Grande home prices have remained virtually unchanged since last year, clocking in at $125,000, while Guayama, Caguas, Fajardo, Bayamon, Carolina, and Arecibo all witnessed increases less than 10%.
Marcos J. Avilés Hernandez, a real estate broker from West Connection Realty in Aguadilla, talks about the main factors fueling the recovery of the real estate sector, especially in his area:
I’m going to answer this based on the Outcome my company has obtained. Although last year we faced grave difficulties in the island, we’ve managed to overcome it. In terms of both marketing and lifestyle, the west area has always behaved rather differently. Most of the growth in the marketing area is due to the increase in industries that have recently expanded their facilities to the area. An example of these can be: Lufthansa, Honeywell, and Hewlett Packard, among others. Another reason that we can add is that, in the West area, we have Military Bases, Homeland Security, and an International airport. In addition, we can also add that Aguadilla, Rincon and Isabela have great touristic diversity due to the beaches and gastronomy of the area. Despite the situation we faced with hurricane Maria, essential services like Electricity, Water and Security are more efficient in the west area; this could also be an element that contributed to the increases in the rates. Most of the products I sell are newly made properties or ones that can be customized. This component gives the costumer a bigger advantage to find the properties they desire the most.
As for the markets where home price recovery is slower, or where home prices have continued to depreciate, it seems the volatility of asking prices, combined with certain regional factors have contributed to the negative figures. We talked to Migdalia Hernandez, a real estate agent in Aguada, to find out more:
We had some rough time during the first six months after Hurricane Maria; but then the market started to pick up. I had some properties in “sale pending” status and, despite Hurricane Maria, we closed on them with the exception of one, where the offer got negotiated. I have worked the area of Aguada for 10 years now and the small decline in prices depends on the location. Some areas in Aguada are very desirable therefore the prices are steady and/or climbing.
Cautious Optimism Regarding Puerto Rico
The severe recession that affected the people was discouraging in and of itself; unfortunately, the natural disaster added a tragic dimension to the island’s trajectory. Many Puerto Ricans continue to face the immediate problems of both a lack of proper housing and access to services. They also struggle with the challenges brought on by the debt restructuring process and population losses, in addition to the insidious phenomenon of “brain drain.”
Even as some improvements are made and Puerto Rico takes slow, measured steps toward recovery, the market remains fragile – just like the territory’s future. But, in a place where so much emphasis is placed on sustainability, resiliency, and finding solutions, in the words of Silvio López, president of the Puerto Rico Mortgage Bankers Association, “there’s nowhere to go but up.”
If you’d like to see what the real estate market in Puerto Rico has to offer, take a look at some properties from three of the markets that have seen the most significant home price increases:
- For the purpose of this study, we analyzed asking home prices in 20 large Puerto Rican cities.
- We looked at average home prices in 2016, the year before Hurricane Maria struck, in 2018, and the most recent figures from 2019 to gauge the evolution of the housing market.
- We analyzed all the listings from the Point2Homes.com site, from the years mentioned.
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