Countrywide, America's largest mortgage bank, currently has 14,451 REO properties for sale on its website (click here to see the Countrywide website inventory) - these are foreclosures that the bank now owns. This totals nearly $3 billion in current listing price. In Florida alone, Countrywide is trying to unload 1,561 properties they have foreclosed on for a total price of $315,324,354.
Key West is not immune. Currently, the Countrywide website lists 10 Key West properties that are REO = Real Estate Owned (by the bank, that is).
The chart included with this post shows the rapidly increasing number of Countrywide REOs since the beginning of the year.
Despite real estate prices falling significantly these past two years, the number of properties for sale in Key West remains stubbornly high. Currently there are over 1000 residential listings for the island of Key West - far outweighing the few small number of transactions occurring - and roughly the same as two years ago. Until the inventory level drops and more closely meets demand, prices have no way to go but continue down.
Even if the high inventory levels magically disappeared, there would still remain downward pressure on prices due to:
- the very uncertain state of hurricane insurance in Florida. Hurricane insurance already costs roughly 2% of your houses value each year. Currently, Citizens' Insurance (the State-backed insurer of last resort) is proposing doubling premiums. Though valiant efforts by grass-roots organizations have managed to keep increases at bay, when the next hurricane hits Florida, all bets are off.
- the Florida budget is a disaster - and the county budget isn't much better. Currently, the Florida legislature is working on a budget $5 Billion less than last year. This will devastate many health and educational programs statewide. One has to recognize that this contraction in spending will have its own recessionary effect on Florida.
- the US is, by some measures, in a recession. House prices will not make any progress upward with these headwinds.
- the developers throughout the Keys are still planning to build hundreds more luxury units, which will more than meet any increase in demand
- banks are in peril due to their own lax lending standards and falling house prices. Even if people wanted to buy, they would have difficulty finding financing - especially since South Florida is just about the epi-center of the national housing crash.
- despite the big drop in real estate prices in Key West, many sellers continue to list their properties at stratospheric levels. Anyone listing for more than $500 per square foot should lower their price if they want to sell their home anytime soon (most property is selling at around $350 per square foot and less). Many are probably upside down, and will end up foreclosed upon, further pressuring prices.
- housing prices in the Florida Keys dwarf income levels - an unsustainable imbalance.
- many more foreclosures are coming. despite interest rates being lowered, mortgage rates haven't fallen very much. Borrowers are "upside down" and trapped in variable-interest-rate loans. Foreclosures pressure housing prices lower since banks are eager to drop prices in order to sell property and raise capital.