Monday, June 11, 2007

What $850,000 Gets You in Key West

How out of touch is the real estate pricing in Key West?

How far will this housing market fall? Expect prices to fall at least another 25%.

This is due to:
  • the wave of interest-only loans expiring over the next 15 months
  • tighter lending standards
  • huge oversupply of houses currently on the market
  • many more houses/units currently being developed and offered by developers
  • the real possibility the Fed may raise interest rates as inflation worries bloom
  • the possibility of a recession. Historically, any time there were 4 fiscal quarters that showed less than 2% GDP a recession occurred within the next 4 quarters.
Real estate values are tumbling across the United States and will continue to suffer for a long time. Depending on who you believe, the real estate market will not recover for the next two to ten years. I tend to think that in 10 years, people will be lucky to sell their home for what they paid for it two years ago.
Florida is one of the most affected states. Many homes are in "weak hands" - vulnerable to foreclosure due to the adjustable rate loans.
Key West is seeing its share of declines - but if this house is any indication - homes are still overpriced.
Here is what $849,000 will get you in Key West (this is in the current MLS):
Looks like paradise, eh?
Like this post? Let us know:

6 comments:

Rock said...

That's a poster of what is still wrong with Key West Real Estate, Dave.

Ain't nothing like putting down $850,000 on a property you can't inhabit . . . and then you spend hundreds of thousands more to bring it up to code.

Soon enough, as the typical Key West construction crew drags on the work, the owner of this place will be asking "What have I done?"

Anonymous said...

I think this will be my last comment on this blog as I am tired of all of the negativity. Yes I do agree that homes in KW are overpriced, however your ongoing negativity does nothing more than drive potential buyers away and depresses the market further. You should be encouraging viewers to submit bids for properties even if they are far below the selling price. The market needs to be stimulated. A poor housing market is bad for all of us. I could not disagree more when you said that in 10 years people will not get for their properties what they paid for them two years ago. This statement goes against all of the past trends and common sense. It has never taken the market that long for the market to recover. The other thing that you are forgetting is that a lot of the properties on the market are being sold by speculators, long term owners, absentee owners, etc. They all have one thing in common. They do not have to sell their properties. They are not facing foreclosure and simply are "playing with the market". Prices will remain artificially high as long as these sellers keep their propeties listed. They are doing the legitimate sellers a big disservice by driving away potential buyers and further depressing the market. So why not try and use your influence to bring this market out of its current tailspin rather than just stating the same old doom and gloom sky is falling mentality.

Cayo Dave said...

anonymous - my loyalty is not to real estate speculators. my loyalty is to the Key West community. And for that matter, the wild real estate bubble of the past 6 years has nearly decimated much of our community. Schools are closing, businesses are closing, and affordable housing is non-existant. You may think that the tonic we all need is some positive spin, but you are wrong.
Buyers of two years ago will be lucky to be able to sell their house for more than they paid. Your claim: "This statement goes against all of the past trends and common sense. It has never taken the market that long for the market to recover."
You could not be more wrong. Actually, more decades brought a zero return rather than a postive return (in real terms). The previous post I did What your realtor doesn't want you to know explains that with real statistics.
Prices have little room to go but down. You may not realize how many house purchases were financed with exotic loans by people looking to sell quickly. Without a rising market, each of these "weak hands" will have to sell. Plus, with interest rates rising - home buying will become less and less active.
I do hope you continue to visit and comment.
And if you are looking for good news, there are plenty of other places out there who can fit your needs. May I suggest the Good News Blog.

Rock said...

Hello Anonymous,

I don't see how you can think Dave is doing a disservice by telling the truth about what he and I and others see in Key West Real Estate.

Dave is not a shill for the National Association of Realtors . . . hence . . . people ought to weigh his views very carefully before making the biggest purchase of their lives in this town.

Here, you say we should submit bids for a property. Okay, my landlord has dropped the price on this house I rent from $1.7 million to $1.4 million to $1.2 million and just a few weeks ago, he removed this house from the listings.

Now, you tell me how I can offer a realistic $300,000 for this house and expect my landlord not to take affront?

He and I are not even in the same ballpark, so why waste his time and mine? I'll keep renting this beautiful place and taking the savings to invest in safe dividend stocks which will weather any major crash in the markets.

Meanwhile . . . . . .

You say the market needs to be stimulated.

Why doesn't it ocurr to sellers and Realtors, the problem is not with savvy bloggers and potential buyers sitting on fences who see beyond the hard sell and the bad math?

We've got the Real Estate Cartel sponsoring a lying ad in the newspaper (Take the "It's Never Been a Better Time to Buy a Home" ad which has been running for months in the Key West Citizen which is filled with falsehoods).

We've still got mortgage brokers pushing the "Miracle 1% Loan" in the Key West Mullet Wrapper, yet you want to point fingers at people like Dave and myself for having the smarts to realize this current market is still a sucker's bet . . . especially when you buy with a hybrid loan and you can't really afford the house in the first place?

As for people maybe not getting in 10 years what they might be able to get for their property today, let's look over the 1928 Florida Real Estate Crash: there are still houses in Boca Raton, Miami, and Fort Lauderdale (mansions) which to this day have still not gotten back to their former hyper 1928 Bubble Price.

Real Estate crashed in 89 and 90 in Japan. To this day, prices have not fully reutrned to their bubble (inflation adjusted)top pricing. Hell, to even afford Japanese Real Estate in 1989, the 100 year Mortgage was introduced. How about that? You inherit not only the family "home" you inherited this monstrous loan your father took out to afford a house.

(In America, we've seen the advent of the 40 year loan so we can "afford" an overpriced home. We sell cars with 7 and 10 year loans now, when 3 to 4 year loans used to be the norm.

Our nation of ill-schooled people never learned to think beyond, "How much is the monthly payment?"

Why is it bad to try and reach some of these people with news they can use? Why is it bad to try and help uneducated buyers to stay away from all the sharks who've ripped the shirts off the backs of people buying homes in 2003 through 2006?)

And you know what they said in Japan in 1989 and 1990 when their Real Estate mania was topping? "There's never been a better time to buy real estate in Japan. Japan is an island. The land underlying the homes is worth more than its weight in gold! There's no more land to buy in Japan. It will go up forever."

When Japanese Real Estate went down the toilet, it took their stock market with them. The Nikkei Stock market, by the way, hit an all time high of 38,900 in January 1990. Today, the market has still not gotten back to that high. Yesterday's close was 18,300. This means the market could double from today's value and still not be at the top it made in 1990. And keep in mind, stocks . . . like housing . . . like currencies . . . have lost a lot to inflation.

And you said this:

The other thing that you are forgetting is that a lot of the properties on the market are being sold by speculators, long term owners, absentee owners, etc. They all have one thing in common. They do not have to sell their properties.

That's one of the biggest misstatements in your reply.

Speculators and Absentee 2nd Home Owners have nothing in common with homeowners who bought smartly and who can afford to pay mortgages. Speculators were looking for the flip from the word go. Truman Annex and the Golf Course are filled with illegal rentals which were going to make the 2nd home owners filthy rich while giving them a "free" vacation house to use a month or two out of the year.

Speculators are just the people who are walking away from deposits, who are being foreclosed upon, who are undercutting each other with lower rentals weekly just so they can find someone to help them pay at least the taxes and insurance payments while they continue and try to make the ballooning ARM payments.

And let me say this: if you think it is bad now, it's going to get much worse.

Just yesterday, in Sacramento, CA, a newspaper article said 20% of all ARM mortgages are in foreclosure in that once hot market. In Chicago, 50,000 homeowners are behind 2 months or more on their mortgage payments. And between now and November of this year, $100 billion worth of 1% and Interest Only type loans reset to ARMS which will more than double the monthly payments for Americans who can least afford them.

Your response shows such disregard of the facts that it is you who are a danger to the hard earned money of people who can least afford to buy Real Estate. It is you who is doing a disservice to readers by making baseless claims that all you have to do to make Real Estate turn around is think positive? Jesus Frog, if I took that kind of advice to invest in stocks (I will buy Enron stock because the good men like Kenny Boy Lay and his executives are telling me not to sell, that Enron will turn it around)I would be in the Poorhouse today.

Real Estate is not going to return next year. It is not bottoming out. The bottom is no where in sight.

Do you not know what is going on with lenders, rates, median prices, inventory, shut down projects?" Do you ever read news that might just help you to change your opinions about what is really going on? Or do you drink coffee with a bunch of vested Realtors, lenders and others who stand to lose a lot more if they can't keep this Ponzi Scheme alive?

How can you make such baseless statements and then tell Dave he needs to be Mr. Happy and everything will smoothe out by being oblivious to the truth?

You said,

Prices will remain artificially high as long as these sellers keep their propeties listed. They are doing the legitimate sellers a big disservice by driving away potential buyers and further depressing the market.

1. First, what do you expect underwater people to do who are facing foreclosure? Not try and sell their houses because they are speculators?

2. And then you call them "not legitimate" sellers? WTF? There is no such thing. A person who wants to sell regardless of whether he's behind on mortgage payments or he has a promotion and needs to moves elsewhere or the condo/hotel he bought is not renting out every night at top rates like the Realtor promised, none of these people are Legitmate sellers because supposedly why? Please explain how anyone needing to offload a bad investment, whether its real estate, stocks, bonds, a business, whatever, how can that seller who needs to sell NOW be an illegitimate seller?"

All I can think after reading such a disjointed reply based on mis-information is you must be a Realtor, lender, or homeowner who is stuck behind the 8 ball.

If you have a property to move, drop the price $5,000 weekly. Or auction it off. Get what you can. Be a mensch and realize you made a bad decision.

If you are a Realtor, lender, homebuilder or other type member of the cartel, you'd better learn how the public perceives all of you with your false advertising and your fraudulent pursuit to approve everybody for a loan in the runup.

The piper is playing on the doorstep. It's time the piper be paid.

I don't speak for Cayo Dave, but this is one guy who is not listening to anyone who is so out of touch with reality they think we can wish away the pain by only focusing on "good news" about Real Estate.

Inventory in Key West is still rising. Hidden inventory in Key West is still rising. More houses are added to the MLS listings weekly then are being sold. 90% of properties selling are moving for less than the asking price. And prices have a looooooooong way to tumble before the lower and middle classes will ever be able to buy one of these overpriced homes as lenders tighten up on Liars Loans and rates continue to raise.

I'm going to one up Dave now: it is very possible you may never see the same prices on houses we saw in the Bubble Top of 2005. When you take away the lower and middle classes access to loans AND their incomes have not kept pace with housing prices which rocketed hundreds of percent above the norm, then there's only one way for pricing to go: DOWN.

I can, and possibly will address this better in a post of my own to my own blog with charts and links to prove my case . . . and Cayo Dave's.

I got burned in the dot.com Crash of 2000. That was the most expensive education I ever had about the vested interests of "professional" people and their so called advice.

Like Roger Daultry sang in 1971, "We won't be fooled again."

My life is a whole lot better now that I've quit listening to people who only look at me as their next commission.

Cayo Dave, keep up the good work.
I'm going fishing.

Gone.

Rock

Anonymous said...

Cry me a river , someone can't sell their house for double in couple years.

[i]o why not try and use your influence to bring this market out of its current tailspin rather than just stating the same old doom and gloom sky is falling mentality.[/i]

Why is it doom and gloom?, falling prices are great! There are already cheaper rentals floating around in the paper. I hope it keeps dropping back to at least 2000 prices.

Anonymous said...

Now that you've printed some truth about the real estate market you ought to write about all the crime that goes unreported in the media.