Florida Housing Bad - Predicted to Get Worse

According to a widely watched index, Florida leads the nation in falling home prices. And if forecasts are correct, 2008 will be even worse.

The S&P/Case Shiller Home-Price Index released yesterday showed Florida home prices have declined 12.4% over the past 12 months - worse than any other state in the country. Meanwhile, the Housing Predictor website yesterday released its forecast for Florida, predicting that in Miami "as Housing Predictor forecast last year, the market is falling and has become the epicenter of America’s housing crisis. Values have fallen by as much as 40% already and more deflation is in store for the market."

Here is a chart of their Florida housing predictions for 2008:


So things look bleak for the Florida housing market overall. Unfortunately, the data does not show the Florida Keys.

If you want to get an idea of what your house is worth in Key West, take a look at comparables - sales that have recently occurred in your neighborhood.

Here are the sales over the last 4 weeks in Key West:

• 1116 Whitehead St - Single Family - Old Town - Price Per Sq Ft. $302.30
• 1501 Olivia St - Single Family - Old Town - Price Per Sq Ft. $411.52
• 1116 Elgin Ln - Single Family - Old Town - Price Per Sq Ft. $629.95
• 1402 Olivia St 1 - Condo/Townhouse - Old Town - Price Per Sq Ft. $325.00
• 3708 Duck Ave - Single Family - New Town - Price Per Sq Ft. $275.16
• 1326 10th St - Single Family - New Town - Price Per Sq Ft. $351.44
• 2401 Harris Ave - Single Family - New Town - Price Per Sq Ft. $321.77
• 800 Georgia St - Single Family - Meadows - Price Per Sq Ft. $445.28
• 3930 Roosevelt Blvd W311 - Condo/Townhouse - New Town - Price Per Sq Ft. $390.82
• 1437 12th St - Condo/Townhouse - New Town - Price Per Sq Ft. $227.22
• 1328 Seminary St A - Condo/Townhouse - New Town - Price Per Sq Ft. $358.02
• 2601 Roosevelt Blvd 207C - Condo Townhouse - New Town - Price Per Sq Ft. $290.82
• 1445 Roosevelt Blvd 411 - Condo/Townhouse (with Transient License) - New Town - Price Per Sq Ft. $593.09

Multiply your home's square footage with a comparable sale's "price per sq. ft." and you'll get some sense of its current value.

And if you are looking at buying, hopefully you'll get a sense of where fair value is.

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Is Upscale Tourism the Next Bubble to Burst?

Upscale Tourism. Seems everyone is debating it these days.

But Key Westers should be asking themselves if it is for real - or is it another speculative bubble, ready to burst?

To answer this question, take look at where this Upscale Tourism Bubble came from.

The Upscale Tourism Bubble was built atop the Real Estate Bubble. As Key West real estate turned to mania, it propped up the idea that everything in Key West is now upscale.

During the Key West real estate bubble, speculation ran wild. It appeared that everyone was flipping properties. Money was easy to get as lenders, realtors, and mortgage brokers handed loans to everyone. House prices jumped from $150,000 to $300,000 to $600,000 to $1,200,000 - all in the span of 8 years.

And it was precisely at this time that the notion of Key West tourism going upscale was born. Speculators thought to themselves, "Heck, if people would pay $1 million for a Conch shack, why not make them pay $300-$500 for a Key West hotel room?"

Developers and speculators, drunk on real-estate-bubble-profit dreams, thought everything was going upscale - and bought up hotels, motels, and other property - thinking they'll get a huge return on their investment.

No doubt, hotel room rates in Key West have increased significantly over the past few years. But this is mainly due to a decrease in the supply of hotel rooms. At least 800 rooms have been offline over the past two years - and the room rates show it.

But can Key West become "upscale tourism" while the housing bubble bursts?

The answer is likely to be no - since one bubble was built atop the other.

As the real estate bubble bursts, the Upscale Tourism Bubble will burst as well.

Fortunately, since empty hotel rooms are like empty "for-sale" houses, room rates will fall - especially from the lofty levels many developers have been throwing around.

So, get ready for the next crash. As the hotel rooms come back online, rates will fall. This may not happen immediately - since the Spottswoods are planning to tear down 500+ hotel rooms in their effort to create a major Upscale hotel/timeshare/condotel/whatever out of 5 of the last affordable hotels left on the island.

Unfortunately, the Mayor of Key West appears to be painting the community into a corner - betting the ranch on upscaling and ignoring the bulk of our visitors - a base which took decades to build.

He's hanging onto a sinking ship - called the SS Real Estate Bubble, and has tied the tourism industry, along with the livelihood of everyone in Key West, to it.

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Is the Mayor Listening?

Few stories have raised such suspicion and anger than Key West Mayor Morgan McPherson's surprise move to oust the head of the Tourist Development Council, Harold Wheeler.

Wheeler is nearly unanimously appreciated for the work he has done during his 12 years at the helm of the Florida Keys marketing arm. As a matter of fact, he recently received a glowing review and a pay raise in recognition of all the good he has done for the Florida Keys.

Every Chamber of Commerce and tourist organization in the Florida Keys has spoken out strongly in favor of Wheeler. At yesterday's meeting to decide the fate of Wheeler, over 120 community members and business leaders showed up and supported him. Fortunately, for now, Wheeler kept his job. But is in no ways safe. Mayor McPherson still seems intent on getting rid of the well-liked TDC head.

So why is the Mayor of Key West looking to fire him?

The answer is likely in the tug-of-war between real estate developers and speculators who want to "upscale" Key West and the tourism industry which is the main economic engine of the county.

McPherson has a background in real estate and seems to be firmly in the upscale developer camp. McPherson wants to spend less of the Tourist Development Council money on advertising and more on infrastructure. The mayor has been vague about what direction he would like to see the TDC head - and that is partly why the whole situation is so perplexing.

The developers have laid huge bets - building hundreds of million dollar condos , McMansions, condotels, and dockominiums that are having a difficult time selling since real estate values in the Keys are deteriorating. Developers have purchased many Key West hotels - converting them to either expensive condos or expensive hotel rooms. No doubt these developers are sweating.

In short, the real estate bubble nearly consumed much of the tourist industry in the Florida Keys. It has made housing unaffordable for workers necessary to the tourist industry, and diminished room supply resulting in greatly increased room rates - pricing out much of the Keys traditional visitor. If not for the bubble bursting, who knows how many more hotel rooms would be taken off the market (by the way, this year over 500 hotel rooms will go "off line" as the Spottswood developers plan to rebuild 5 hotels into an upscale condo/timeshare/hotel.)

This week's Sunday edition of the local paper had a front page story asking if the Keys will be "Key Fancy or Key Funky".

It looks like the mayor is aiming for one thing: Key Fancy. And now that he has been re-elected by a very slim majority, he is behaving as if public input doesn't much matter. Aside from his move to oust Wheeler, the Mayor also ignored public outcry to help save the funky Waterfront Market and was the sole "no vote" to extend the market's lease.

But a word of caution to the Mayor: Your bet on upscale development at the expense of tourism has a good chance of backfiring. The real estate bubble has burst, the economy is arguably in recession, and the State of Florida is in a fiscal crisis. Don't bet the farm on overpriced real estate while sacrificing the charm of Key West and the main economic engine: tourism. You may find that tourism is built for the long run while real estate bubbles only arrive once in a generation. And it is not just tourism that is at risk. The families of the island will find it more and more difficult to live here, raise families, and succeed if there is not industry for them.

The Florida Keys and Key West are not Nantucket - nor do most people want it to become Nantucket. If the Mayor would like to change the direction of the marketing plan for the Keys, then he should attend the meetings and work with the experts and public.

At the very least, the Mayor needs to listen to the people, respect and represent them.

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Newbie Flippers Sue Real Estate Infomercial Guru [VIDEO]

We've all seen them: get-rich-quick real estate programs hawked on television infomercials promising an easy road to wealth.
Typically, some "real estate guru" loosely explains how they made fortunes, and now offers the program for sale - all the while chanting "No Money Down!" and citing huge payoffs.
One such program, from Russ Whitney and the Whitney Information Networks, is being sued by people who took their "classes" and subsequently buried themselves in the real estate market.
Here is a video detailing one woman's allegations: that she spent $30,000 on classes with Russ Whitney (amazing by itself), and then developed a house allegedly at the suggestion of the Whitney organization and which has little chance of making money.

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