Florida Keys Paying the Price for Selling Off Hotels

Its cold up north and the weather in Key West is balmy and perfect. So where are all the tourists?

Although tourism is normally a bit slow in Key West between Thanksgiving and Christmas, many local businesses are grumbling that things are slower than normal.

Alarming statistics show that bed tax revenues are at a ten year low! (the country charges a 4% "bed tax" for lodging). Why is this happening? Maybe because , as I have pointed out before, the City of Key West and Monroe County are allowing their economic engine to be sold off to the highest bidder.

During the insane go-go-go-go real estate market of the past 5 years in Key West & the Florida Keys, hotels, guesthouses, and RV parks have been bought up by developers and are in the process of converting them into million dollar condominiums. Currently, there are over 1200 "rooms" that are not available due to converting into condos/condotels. As a result, with fewer hotel rooms available to rent, the average price of a hotel room in Key West has risen. Yet that does not explain why occupancy rates have not been full.

Supposedly many of these converted hotel/condos will be rented out once again. I think it is unlikely that they will. Let's look at the rational behind this arguement. For example, suppose someone buys the "condotel" room/unit for $1,000,000 (one million dollars). The mortgage on the property, with 20% down, would be over $6400 per month, plus taxes and insurance and condo fees (and electricity, water, sewer, garbage utilities etc). Let's call it $9000 per month. For the room to just recoup the expenses, it would have to be rented out every night of the year for $300 per night. And that would only get you to break even.

So the question is: Can Key West regularly get $300 per night from a huge number of tourists? Today's Tourist Development Council President, Harold Wheeler, said that he thought that our bed tax numbers are at 10-year lows because the price we are charging for hotel rooms it too high. So why should anyone think that our tourist market will be able to support even more expensive lodging?

But what about the reality that most people who buy a million dollar property are unlikely to rent it out to strangers. For them, it is a second home...maybe an "investment". Then again, I think it is nuts that anyone would buy a hotel room for a million dollars. At that price, it surely can't be a "flip", something that hyper-inflated housing prices recently and is now starting to unwind/deflate.

The City of Key West and Monroe County should be very concerned about what is happening to the main engine of our economy - tourism. The mayor of Key West said he wasn't worried and attributed the bad bed-tax numbers to Florida's ranking number one in the nation for foreclosures. I have a feeling that our Mayor has been too dependent on real estate and is missing the boat about tourism. As the real estate boom goes bust, the financial stability of the Florida Keys will be upended.

And yet, through it all, nearly nothing is being done for affordable housing. Workers are leaving in droves, and I suspect that this year will be make-or-break for many Key West businesses.

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Praise for Conchette & Her Tampon Blog

I just wanted to post some praise about the great job Chonchette is doing at her blog Tampon Blogger (which stands for "Truman Annex Master Property Owners' News").

I don't know her personally, but I applaud her coverage of the Truman Annex versus the City of Key West battle over the control of Southard Street - a.k.a. the gate issue.

Conchette clearly has some deep connections within Truman Annex, and she has brought to light several documents, for example here and here, that show TAMPOA's position on the gate is not unanimous within the Truman Annex community.

Plus, Conchette has had to suffer the slings of anonymous comment posters who have tried their best to discredit and insult her. I praise her ability to remain level headed and keep the attention on the issues. Good work Conchette.

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Is Florida's Housing Bubble Imploding?

Statistics recently published reveal that the Florida housing market is in serious trouble.

After years of wild speculation, enormous home sales and price gains, and record numbers of new homes and condos constructed, it now appears that Florida real estate market may be in serious trouble.

While the nation as a whole saw a year-over-year decline in October housing prices, some of Florida's communities were among the nations biggest decliners. Meanwhile, the foreclosure rate for Florida has significantly spiked upward, foreshadowing continued problems for the real estate market.

Here are some of the details of the statistics recently released:

Three Florida metro areas were hit hard by price drops. In Sarasota, the median home now sells for $320,700, off a whopping 9.4 percent from last year; Palm Bay/Melbourne/Titusville prices sank 9 percent to $193,600; and Cape Coral prices plunged 8 percent to $255,400.

RealtyTrac, an online marketplace for foreclosure properties, reports that 115,568 properties entered into some stage of foreclosure in October, a 42 percent increase over last year and an incidence of one for every 1,001 U.S. households. The comparison with October of 2005 was particularly dramatic because that month in 2005 recorded the highest foreclosure rate last year, according to James Saccacio, chief executive officer of RealtyTrac.

The newest data continued a strong trend from the past three months that shows foreclosures definitely moving upward, according to Saccacio. That puts more pressure on an already strained housing market.

In the month of October 2006, Florida had 11,413 foreclosure filings. That equates to 1 in 640 household - a fifty percent increase over the past 12 months.

Here in Key West, the housing picture looks bleak. The speculation of the past 5 years has driven many local residents off the island, as affordable housing vanished from the Keys. This is the county's number one problem, yet unfortunately they seem to have been unable to find a solution. With a record number of residential properties on the market in Key West (and more continue to be built), and nearly none of them selling, prices will have to fall much further before finding solid footing.

Maybe I was right: everyone in America cannot suddenly afford a second home. The aberration was caused by banks loosening their lending practices (remember interest-only payments?) - eventually building up a pyramid that required new buyers to pay every higher prices. Once prices had reached their peak, a cascade of sellers glutted the market. It was a bit of financial trickery led by aggressive lending practices, and it very well may shake the banks themselves. They have lent too much money for too little equity.

It will be a long time before this housing bubble collapse is over.

Now where are the realtors that were practically promising their customers huge gains? I believe more than one said "You can't lose".

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Reef Relief Holiday Auction

This year's Reef Relief Holiday Auction is underway! This year's auction has great items - plus, by bidding, you'll help out an important cause, saving our coral reefs. You might find that perfect holiday gift too.

Thanks to generous donations by over 100 business including many from Key West, you can bid on art from Key West artists, exciting boat trips, excursions, and other wonderful items. All proceeds will benefit Reef Relief's efforts to save the coral reefs and educating the public about our marine environment.

Check out the desirable items and get in on the bidding action at http://www.reefreliefauction.cmarket.com/

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Key West: Highest Rent Does Not Equal Best Tenant

Whoever told the City of Key West Florida that the best tenant is the one who can pay the most has done the community a disservice.

The City should view it's tenants as partners - and should do what is in the best interest of both.

Just because someone else will pay more rent for a property does not mean they are the best tenant. They are unproven and don't necessarily have a good business plan. Plus, are they displacing a business that is loved by the community and that loves the community?

The City should look down the road to the possibility of a rent deficit when these highest-rent-paying businesses fail. Then who will take their place? How will the City deal with a shortfall then? Raise taxes of course.

Should the mom-and-pop businesses in this town have to pay a ridiculously high rent because a big box retailer is willing to pay more? I say no way. And who wants big box retailers in Old Town Key West? I do not.

One by one, the City of Key West is squeezing mom-and-pop businesses out, and I am worried that the City is sacrificing the community's character and amenities in the pursuit of maximum rents.

I mention this because the local beloved grocery store The Waterfront Market has been in a protracted lease negotiation (10 months and counting) with the City of Key West. The market is located at the Key West Bight, which has been raising rents through the roof on many businesses, forcing many to shut their doors. The Waterfront Market is a true community resource, supplying fresh fish to local restaurants and citizens, along with the island's most impressive grocery selection.

If the City stays on this course, they may one day lose their stable tenant base. This is a far greater cost than the benefit of temporarily higher paying tenants.

The value of a tenant cannot simply be viewed as the rent he can pay. Instead it is a combination of the value to the community + the rent the business can afford. The Waterfront Market adds a lot of value that isn't reflected in the rent numbers, and the City should recognize this and work with Buco (the owner of the Waterfront Market), view him as a partner, and charge a rent that does not force him out of business.

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Navy to TAMPOA - Gates Are Not Acceptable

The local press today reports that the Navy opposes any plan to place gates on Southard Street in Truman Annex. On the morning radio show, the second in command for the Navy in Key West said that they will not show identification to TAMPOA nor will they allow gates that restrict access. This is good news for those in the general public that are concerned about restricted access.

The Truman Annex Master Property Association (TAMPOA) has been battling the City of Key West over control and ownership of the portion of Southard Street that runs though their Truman Annex neighborhood. That street is used by the Navy for access to its property. The public also uses the street to acces Fort Zachary State Park and the Truman waterfront property. TAMPOA has stated that if they don't gate off that street then their wealthy-yet-conformist neighborhood will no longer be considered a "gated community" and therefore lose value. Looks to me like TAMPOA is in a lose lose situation.

It is time for TAMPOA to recognize the importance of the street to the Navy, the citizens of Key West, and the general public. TAMPOA, please stop planning to restrict access. Either that, or face the wrath of the public, the will of the City of Key West Commission, and the bottomless pockets of the US Government.

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NO DEAL: Key West vs. Truman Annex

Recent reports in the local press stated that Commissioner Verge had presented a compromise agreement to TAMPOA (Truman Annex Master Property Assn) over the use of the portion of Southard Street that runs through Truman Annex. Those reports said that the proposal would allow unfettered access for the public during the day, but at night gates would be locked and the public would not be able to use Southard Street. Frankly, I couldn't believe that the City of Key West was willing to give up so much on this important issue.

But according to the Bahama Village blog, no such agreement was ever offered. Let's hope so.

Most Key Westers don't want to see Southard Street gated and closed to the public.

It is time for the City Commission to show its political will and do whatever it can to have control of this important street.

To me, this is all a head fake by TAMPOA, who it seems is really interested in controlling what is outside of its gate at the adjoining Truman Waterfront property the City received from the Navy.

Again, I implore City Commissioners to not lose will on this battle. The citizens are behind you. If you must use emininent domain to take the street (and according to TAMPOA effectively removing them from being a gated community) then get your money's worth and open up all the streets in Truman Annex.

And don't listen to the huffing and puffing of the "Manics in the Annex" about the cost of eminent domain. Remember, these streets are still going to be streets. But now, the public will be allowed to use them. It won't be cheap, but control of a major road is well worth it.

By the way, the developer of Truman Annex seems as disgusted as most Key Westers are over TAMPOA's behavior. Pritham Singh has publicly warned TAMPOA to back down and come to their senses. So far, TAMPOA still has it's head stuck in the gate.

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Key West Real Estate Bubble At Risk of Bursting

If the laws of supply and demand are to be believed, then Key West's real estate market may be in trouble. Economic law says that too much supply in the market leads to falling prices.

Statistics recently released show that the number of properties listed for sale in Key West has hit a 5 year high - now over 1400 properties. This number is roughly three times the number of houses normally on the market, and 40% above a year earlier.

The rapid increase in the number of properties is astounding, but may be understating the weakness in the market. Many properties have been removed from the mls listings waiting for better prices. The wait for better prices may be significant, especially when the large number of developments underway begin to hit the market.

After the jaw-dropping rise in home prices over the past 5 years, there is plenty of room on the downside.

Currently, I've noticed Key West home prices have already been reduced by at least 20%, and the few that are selling are seeing increased selling times and further sales price discounts.

Next week is a well advertised auction for 22 Key West properties signaling the abundance of sellers.

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Key West Fantasy Fest Photos - Body Paint

Fantasy Fest, Key West's biggest party, is underway on the island. Last night Duval Street was packed with tens of thousands of people - many dressed in little more than body paint.
The cameras were crowding around every "pair" visible, and some of those unofficial pictures are now posted (thanks to the good folks at http://www.keywesttravelguide.com) at Fantasy Fest Body Paint Photos
These may not be appropriate for work. Then again, maybe it is a good time to get a new job.
Enjoy - and don't miss it next year!
(Tonight is the big street parade with an expected crowd of 70,000. See you at the parade.)

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Funny! Key West Pets in Costume

Pets in costume were on display last night during the Key West Pet Masquerade. This is part of the weeklong mega-party named Fantasy Fest...Key West's biggest tourist draw, and it was a great time. This years new location was a little small for the normally huge-size event, but everyone had a great time and laugh nonetheless. Beautiful weather, gorgeous scenery, and a lively party make Key West no wonder as one of the world's great places to hang out. And it never snows - so come visit when you catch a chill!


Cats, dogs, geese, and even snakes were present - along with other animals - dressed with their owners in hysterical costumes.


Here is a collection of my favorite pet costumes that I was able to capture.


A family of pirates, along with dogs and tiny puppies, prepare for the stage.

Spectators craning for a view.


A beautiful sunset, as a tall ship makes its way into the Key West harbor.


It's true - eventually you'll look like your dog.


Thanks to Dracula's tender touch, the cat had gave up on fighting, and enjoyed the show with her winged handler.


Here is a close-up of that cat - still trying to figure out how to fly out of here.


That's one happy dog. Now that's Fantasy Fest for ya.


Royalty was well represented by this regal pooch.


Someone even had a cow dressed as a dog! Very believable.


Dressed in Congressional Report newspaper. Maybe he's not paper trained yet?


Someone feels pretty.


Argggh. I want a treat says the dogs.


Again proving that owners eventually look like their dogs.


Not sure who is the owner and who is the dog, but these two looked adorable.


Imagine trying to paint your cats face? That is one cool cat.


One happy heifer.
More Fantasy Fest madness will continue this week. Check back for more postings and pictures.
And if you dug these photos, please DIGG it by clicking the link below. Thanks!

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