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Wednesday, August 5, 2009

Reversal of Fortunes - Key West Real Estate

People are funny. They always want what they can't have. Little kids want to grow up; adults wish they were younger. They buy giant SUVs that cost moola money; they trade in clunkers for cash which could be as rash. They admire the body of Adonis; they continue to eat at Abbondanza. They see a "wet paint - don't touch!" sign and tap the spot on the dot. They dream of owning a place in Key West; they scorn a deal that could seal their fate.

Between 2004 and 2006 when real estate developers were going hog wild building new properties from one end of Key West to the other, this town of ours was hoping. Since Key West has a limited supply of the kind of places most second home buyers theoretically want, developers did what they do: they developed--the best! Because of its limited land size, lot density requirements, height restrictions, HARC guidelines, and State of Florida imposed limited new residential construction permits, the developers constructed numerous high end properties. While each was different, they were all pretty much the same in that they were designed to appeal to our inner snobbery. Location, amenities, high price tags were the common bond of these Key West properties.

Developers envisioned big projects with big profits. Some were built. But not all of the projects broke ground. Other projects were stymied by lawsuits by neighbors protesting developments they did not want. Harbor House Condominiums is a multi-million dollar example. The delays cost the developer valuable time and racked up huge legal fees. When construction finally started, the market had already started to fizzle. There is a story in today's Key West Citizen CLICK HERE about a code violation of a construction fence surrounding the the now "abandoned" project (see photo above taken this morning). Another example was the proposed condominiums at Atlantic Shores. Delays there caused the project to instead became more hotel rooms at Southernmost on the Beach Resort. There was major erection dysfunction.

But some of the projects did get built. Parties were given to introduce the people of Key West to the new developments. I even wrote about a few of the parties I attended when I started this blog. I knew at the time that there were too many high-end projects and not enough buyers. Most of the units built were 1500 square feet or larger. Most had private pools, designer kitchens, three bedrooms and bathrooms, and enough amenities to lure buyers into spending two million dollars for a vacation home in Key West. Most of the new construction did not get purchased. Some of the few that were purchased have since become or will become short sale or bank foreclosures.

The fact that most of the units that were built were not purchased should not surprise us. Even if there was a real demand for so many elegant units, I think it was foreseeable that there would not be enough ready, willing or able buyers to pay the outrageous prices. Many lot of the units that were built during this time period are now offered at much lower asking prices. Some owner/developers or lenders have turned unsold units into vacation rentals and await a real estate market rebound.

The thing that strikes me funny is that buyers who lusted after units priced at $2,000,000 now scoff at the idea of paying perhaps half the price. That same buyer's "logic" applies equally to single family homes, especially the well located and tricked out houses in Old Town. The properties they coveted are now marginalized.

You may have seen the story about the family that is the sole tenant of a 32 story condominium in Ft. Myers CLICK HERE That family was on the evening news yesterday. As I watched the report I looked at the building and thought to myself that the building and dozens, maybe hundreds, of similar buildings are located across Florida and that they all face a common future: it will be years and years before all of those units get filled. But Key West has never been and never will be like the rest of Florida. There is a limited supply of houses and condos. My advice to would-be buyers is to buy now before the market correction is complete. Because prices will rise and property in Key West will cost more. I have already heard of bidding wars going on for lower priced units at some condominium and townhome developments. Some developers are now exercising their right of first refusal.

CLICK HERE to search the Key West Association of Realtors mls database. If you see something you like, please contact me, Gary Thomas, 305-766-2642 or e-mail me at I am a full time Realtor at Preferred Properties Coastal Realty, Inc. in beautiful Key West, Florida.

1 comment:

Anonymous said...

One of your best yet. I never fail to learn something from your blogs and love your perspective on the market. Excellent - keep it up and keep us informed.


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Gary Thomas in a Nutshell

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Key West, Florida, United States
I first read about Key West in a magazine called "After Dark" sometime in the mid 1970's. But it wasn't until March 1984 that I made my first visit to the island that would become my home. I had two weeks for a vacation and reserved a room at Colours Guesthouse (now Marrero's Guest House) for one week. I thought that if I didn't like Key West, I could always go back to Miami or Ft. Lauderdale for the rest of my trip. But after a couple of days in Key West, that was no longer a consideration. But when I wanted to extend my stay for the extra week I found there was no room at the inn. The guesthouse owner did find me a room at LaTeDa, the infamous guesthouse/restaurant. That's a story I'll write another day. But those two weeks in Key West gave me the realization that I had found Paradise. Key West has been my home since 1993 and my only regret is that it took me so long to get here. I am a full time Realtor at Preferred Properties CRI. Let me help you find your new home or business in Paradise. Living in Paradise is not a slogan, it's a way of life.