Thursday, May 12, 2005

We Want a Neighbor, Not a Speculator (chant)

Well, I've come to a new conclusion about the future of Key West's real estate market. Let's call it a new level of extension, if you will.
For quite a while now I've been warning of the affordable housing crisis looming on the horizon for Key West. And recently, have been joined by a host of worried politicians, half heartedly stabbing at the problem with bureaucracy. Mostly though, it is a small town where many characters double as officials and interested parties. The crisis is here, and it may tear the town in two before it remedies itself. Remember, these are houses and homes...not stocks and bonds.
And this leads to the new thinking. The impending housing surplus! The city and county have no choice but to build a large amount of housing. They need the employees, and the state may have gotten the word. Rumor is that the county is about to get a sizable number of housing permits freed up in the name of more generous hurricane evacuation times (oh, yeah, and affordable housing...right).
The Key West real estate bubble is similar to the rest of the country. It is fueled by low interest rates, and especially, generous lenders. When rates rise, interest-only loans vanish and remove a large amount of the demand. Let's call it artificial demand. Eventually, when those loans disappear, we will be left with a lot of surplus housing. For a place with no building permits being allocated, there is an amazing amount of building in the Florida Keys...Probably 1000s of units in the past 5 years.
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