The number of Key West residential properties for sale continues to increase. I've been keeping an eye on the number of listings on the Key West MLS over the past month.
For example, a March 28, 2007 search of the Key West MLS showed 1135 residential properties for sale. One month later (today), the same search showed 1173 residential properties for sale - a 3.3% increase.
Local realtors continue to beat the sales drum, claiming it a great time to buy a Key West property. But if one understands the laws of supply and demand, then further price drops are likely. Simply put, more sellers than buyers equals lower prices. This could be one of the worst times to buy - especially for investors.
This data comes at a time when national home sales are plummeting. Sales of existing homes in the United States plunged in March by the largest amount in 18 years - causing the National Association of Realtors to say a rebound in housing may not occur until 2008. According to data released by the National Assn. of Realtors, sales of existing homes in the US fell by 8.4% in March, a decline that was three times what was expected.
So how much will prices fall? It is tough to estimate, but given the irrational rise in prices over the past 6 years, a significant drop in prices seems certain. Historically, price declines lag behind downturns in sales by 12 to 18 months.
I'm going to go out on a sturdy limb here and say this: Real estate prices will not surpass what was experienced, at least in your lifetime.
The fallout for this, both nationally and for Key West, is likely to be immense. Key West is especially vulnerable, as our basic industry, tourism, has been gobbled up by the real estate monster. Hotels that converted to "condotels" and luxury condominiums are going to have a very difficult time finding buyers, and some of the projects may find themselves unable to survive. This could leave a big deficit in the number of hotel rooms available for tourism.