Strange. Today's Key West Citizen editorial, titled "A Keys buyer's market offers opportunities," read as if written by a real estate broker. The editorial makes a case for why it is now a good time to buy.
No doubt, the Keys are a wonderful place. But market indicators show that Key West real estate has further to fall before bottoming.
Like it or not, the Citizen's editorial staff may have recommended catching the proverbial falling knife. It may be one thing for the editors to look the other way while the real estate pros continue to publish an erroneous and misleading advertisement. But I found this use of the editorial space to be a disservice - mainly because it overlooking the apparent problems with the real estate market.
Supply continues to heavily outweigh demand. Before a bottom in the market is achieved, supply and demand will need to find equilibrium. Although the bear market is into its second year, the technical indicators have not improved. In fact, they have deteriorated.
The number of properties for sale in Key West for the first three quarters of this year continued to swell higher.
Meanwhile, total sales, value of sales, and average sales price continued to fall. Further compounding the bear market in real estate, average days on the market swelled higher.
According to data recently published for residential Key West real estate, comparing the first 3/4 of 2006 versus 2007:
- total sales were down 0.5% to 366
- dollar value of sales dropped 15% to $305 million
- average sales price dropped 14% to $833,000
- average days on the market grew 29% to 174 days
- average list price was down 7% to $991,000
- the number of properties for sale increased 9% to 1394
We have likely not seen the bottom of the real estate market here. The Zillow chart attached to this post shows the Market Value change for Key West over the past 10 years. (Notice, on the chart, that a double bottom is trying to hold (the right side of the chart). But given the supply/demand numbers, prices are likely to continue to fall - thereby breaking the double bottom. When this happens, it is often referred to as the "other shoe dropping".)
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