The question everyone should be asking is: "Will they sell?"
If Miami is any indication, the Key West condo craze may be in serious trouble.
Miami is Key West's closest South Florida major city. There, the condo craze of the past few years is going from boom to bust.
As condo prices in Miami went through the roof over the past few year with wild speculation and flipping, developers responded by planning thousands of new condominiums. Much of that demand and speculation was driven by record low interest rates. Now, with rates higher, Miami is quickly realizing that many of those units don't have real buyers who actually want to occupy the pricey condos. As a result, many projects are unsold and quite a few are being scrapped.
According to Miami city officials, 15 condominium developments have been scrapped totalling nearly 2000 units. Still in construction is over 75,000 units among roughly 300 different condo projects.
This steep downturn in the condo market in Miami is showing up in their sales numbers. In October, sales of existing condos dropped 31% compared to the same month last year. Prices are also headed south, falling 2% that month.
Developers in Miami are likely to panic if things don't improve soon - which is unlikely. According to Lewis Goodkin, a Miami economist and real estate analyst, it may be 5-10 years before condo prices hit bottom and start to rise.
Should Key West be worried? Certainly if you bought a condo at the top of the market and were hoping to "flip it".
But there is probably a greater threat to Key West. Many of the condos being developed today are Key West hotels which have historically been a major part of our tourist economy. If these new condotels don't sell, will the Key West economy suffer? As a tourist based economy, it is hard enough on local businesses trying to survive with the current 700 rooms offline during their conversions/renovations.
Have the developers put us all at risk?