The Key West MLS has reported that the number of homes sold in the first week of the year has dropped from 54 sales to 16 sales.
But maybe more telling is the tone of voice of local realtors. Most notably is Regina E. Corcoran, a Key West realtor with a column in Key West's biggest newspaper.
In this past week's column, Corcoran urges buyers to come out of the woodwork and buy, buy, buy. Her reasoning? In her view, the downturn in the real estate market is temporary and caused entirely by post-Hurricane Wilma anxiety. She goes on to argue that Hurricane Georges, in 1998, caused a short-term disruption to the real estate market, and that Hurricane Wilma will soon fade into memory.
Corcoran has completely ignored the major reason for the bull market in Key West: interest rates. After Georges, the Prime Rate dropped from 8.5% to 4% (a period of 6 years). This has led to easy financing and a speculative environment. Now, however, interest rates are heading in the opposite direction. Since bottoming in 2004 at 4%, the Prime Rate has risen to 7.5%, a huge increase. This is precisely what is deflating the housing bubble - not just in Key West, but in many overheated markets throughout the United States.
But Regina Corcoran continues to give horrible advice in her column, encouraging people to buy any way possible. Most astounding, in her column she wrote:
True "no doc" money exists. That means if you have a pulse, good credit and a 5 percent down payment you can own a home.
Think about it, Einstein. You need 5 percent down, but nobody asks where you got the money. You could even put it on your credit card.
I don't think I need to elaborate on why buying an overpriced house using a credit card is a moronic idea.
What a shame, that realtors aren't bound by the same rules as fiduciaries.
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