Wednesday, January 23, 2008

Key West Realtor Predicts Prices Will Fall Further

So how bad is the real estate market? For one of the first times, I suggest you listen to a realtor.

According to a local realtor's blog, Gary Thomas writes that much of the real estate market is still overpriced and, like the doomed ship Poseidon, will likely fall further.

One property Thomas mentions was listed in 2005 for $1 million. Today it is listed at $395,000. Amazingly, even at this price, he believes "it isn't even worth that much".

Here is an excerpt from his post dated January 17, 2008:

What you can't see are the daily entries of new listings, price reductions, contingent sales, pending sales, solds, and expirations. But I can. And the number of Price Reductions that are happening is alarming. There are not just a few. There are a lot--everyday. It's like the sellers are finally coming to the realization that we are near the end of the first month of our sales season and that if they have not been getting any positive action on their property that maybe, perhaps, probably their sales price is too high. "Duh!" to quote Homer Simpson.

Yesterday for example one Broker/Owner reduced the price on four separate over-priced properties the Broker/Owner owned and this time included language that each individual may become a "Short Sale" requiring lender approval (shorthand for loan forgiveness) to get the deal accomplished. I specifically recall showing one of these properties in the early summer of 2005 when it was priced just around $1 million. Today it was reduced to $395,000. And it isn't even worth that much. I think the Broker/Owner has finally capitulated.

Yet there are still Realtors listing properties at prices that are out of touch with reality. You will note that I normally recite the price per square foot when I discuss a particular property. That is so the reader can compare other properties to make an evaluation of the real value of the particular property I am discussing. There are a few properties that are so well located and so perfectly done that they may qualify for an astronomical asking price, but the emphasis is on the word "few".

It will be interesting to see how the asking prices shake out during the next three months. The properties that are selling right now are following the traditional Key West sales pattern for years gone by: high end, very low end, and very well located and well priced Old Town homes. The stuff in the middle just languishes. If the market cycle theory holds true more and more sellers will capitulate and that, in turn, will drive more and more prices downward.

My applause to Gary Thomas. Thanks for keeping it real.
Like this post? Let us know:


Anonymous said...

Hope you sent a nice note to Gary Thomas and let him know you lifted his name and his blog for your use.

Anonymous said...

Now lets here from one of the most successful agents in Key West - who really knows the score (from the Letters to the Editor section of the 1/26/08 Key West Citizen). Here is someone who knows the score:

Local real estate market on its way to recovery

Kudos to Business Editor Anne-Margaret Sobota for her great article, "Waiting to exhale." Anne-Margaret is a talented writer and Key West is lucky to have her.

The article provided much-needed, positive reporting of the current real estate market in Key West. We are bombarded daily with negative reports by the national media regarding the real estate market. As Anne-Margaret points out, our local market is not only starting to recover but is showing signs of life. The patient has taken many deep breaths, her blood is full of oxygen and in some areas of town, the exhaling has begun — you can tell I loved the headline.

In my opinion, the secret to this recovery begins with sellers pricing properties correctly. When buyers come to Key West and view overpriced properties and a large inventory, they get confused and may decide not to buy. Historically, overpriced properties do not sell, they just sit on the market contributing to the inventory and to a feeling that everything is for sale. In fact, this January compared to last January, there are less homes on the market in Key West as some sellers have begun to understand the importance of pricing and buyers are responding favorably by making offers.

Selling a property is best accomplished by hiring a professional Realtor to analyze the market, provide information on comparable sales, price the property based on what it is worth, and then market the property aggressively. Most people would not have an operation without a doctor, go to court without a lawyer or get a filling without a dentist. The same logic applies to real estate — hire the best professional for the job and then listen to his or her advice. ...

The Key West Citizen has done our local economy a great service by reporting the positive facts about our current real estate market. Real estate is one of the largest segments of our local economy and all Key West citizens have a vested interest in the market's success. Property owners obviously should care about this, but so should renters, snowbirds, electricians, plumbers, restaurant workers, retail store clerks and artists. When the real estate economy is strong, people will renovate their homes, buy more goods, go to plays and movies, commission artists, eat at restaurants, shop at our stores, and provide quality rentals.

Key West is still a great place to live or have a second home in. Our unique mix of people, great weather, architecture, tropical fauna and flora, arts and theater venues, water sports, and open-minded attitudes are a magnet for people from all over the world.

Let's all be cheerleaders of our local real estate market, continue taking deep breaths, and take positive steps to let the recovery continue — as we all keep waiting to exhale.

Rudy Molinet, Realtor, Key West

Anonymous said...

Have you considered how many of these "broker/owners committed fraud? They took cash out of the properties and now play the victim.

Where did the money go?

Cayo Dave said...

anonymous - you make it sound like I did not cite Gary Thomas and his blog in my post. Didn't you see the link to his blog/post included in my post? My post clearly stated that I've included an excerpt from Gary's blog.
Proper citation and credit has been given - and this is all very typical in the blogosphere (as well as the rest of journalism).
Give it a rest anonymous. If you don't feel like contributing something of value to the conversation, then feel free to not comment.

Cayo Dave said...

Rudy - thank you for your comment. First, I should probably redefine the notion of "recovery" in the real estate market. I've too have lately been hearing realtors in the press claim that the real estate market is in recovery.
Yet, prices are still falling.
So the only thing recovering is the realtors' business - they are making a few more transactions.
But as an owner or buyer of property, the reality is that prices are still falling, and will likely continue to do so.
It is hard to believe that a falling market is "recovering" - except if you are a realtor.
It is like in the stock market when there is a crash. On those days, the volume of shares changing hands is tremendous and brokerage houses/brokers make tremendous commissions on trades. But to everyone who owns stocks, the day is anything but a "recovery".

Sally O'Boyle said...

Define recovery. M-W says it's the act, process, or an instance of recovering; especially : an economic upturn (as after a depression).

There has been no economic upturn in Key West. Prices are still going down. An upturn in sales now would be "an instance of recovering", aka a "dead cat bounce." As markets go down, there are bounces. It doesn't go straight down. Not all at once. Usually.

Plus, these are not homeowners buying. These are investors looking for the bottom of the market. Possibly some 2nd homebuyers. But no mom and pops buying...

I know too many people just entering bankruptcy to think we are in any recovery at all. Florida leads the country in foreclosures. Gloom and doom? No. Reality.

I'm sitting in a home in Tamarindo in Costa Rica and we are talking about the falling market here. It's not pretty and it's not isolated. Brace yourselves.

Bill said...

Hey guys, it looks like all of you are saying the same thing: there's a big supply, lower demand, so prices are going down till the supply and demand curves cross and the market clears out the inventory (although this clearing point will be muccccccchhhh lower than the 2005 level). Whether you choose to call it "recovery" depends on where you are in that process. Gravity is "good" or "bad" depending on whether you are falling or sitting.

mommy said...

Very interesting and spirited comments. We are a family from Mississippi thinking of relocating to Key West. What is life like for young families?

Cayo Dave said...

Very interesting and spirited comments. We are a family from Mississippi thinking of relocating to Key West. What is life like for young families?
I'd say there are probably a lot of different opinions - depending on who you ask. Some may complain of the party atmosphere. Others will point out the wonderful environment and generally good natured community.
But one thing probably shouldn't be overlooked - there are very few jobs that pay enough for a young family to own a home here and save money. Many that live here are willing to sacrafice other luxuries in order to afford living here. But if you are wealthy, then it isn't a worry.
I do love Key West - but I am quick to point out problems that threaten our community. Most notably is the lack of affordable housing and the possible effects of global warming.
Lastly, living on a low lying island in the middle of an active hurricane region means you may find yourself evacuating and recovering from storms.
Best wishes to you with your thoughts of Key West.
I hope other people add comments about this - I would be interested to hear other opinions about young families in Key West.