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Thursday, July 1, 2010

Do You Prefer the Smell of Cat Pee or Garlic?

Despite the fact that we are still in a recession and that the BP oil spill continues to pollute Louisiana, Alabama, Mississippi, and now northern Florida, we had a dang fine June in real estate sales in Key West.

Twenty single family homes were sold and closed in June 2010 in the Key West area. Eight of those single family home sales were in the Old Town area of Key West. The average sales price was $502 per sq ft. Three sales were identified as short sales and just one was a bank owned home. By comparison in June 2009 there were a total of 30 single family home sales in Key West, and twelve of those sales were for Old Town and Casa Marina area properties. The average price per sq ft then was $498. I need to add that none of the sale in 2010 was over $1,000,000 but six of the 2009 sales sold over the one million mark. The price per sq ft only increased by a modest $4 per sq ft. And the sales volume was down 33% over the same time last year. That is not good.

Most troubling to me about the June 2009 vs June 2010 is the fact that we had no sales over the $1,000,000 mark in 2010 but six in 2009. I met with one of the top real estate sales producers in Key West last week to take pics for a customer. This agent has lots of listings and told me that (he or she) was tired of million dollar listings (inferring that they are not selling whereas lower priced properties have a better chance of selling). A neighbor of mine just changed listing agents and listed his house with someone I care deeply about-but not me. The house is great and ought to sell. But it has been on the market for nearly a year and has not sold because it is priced too high. Some sellers still don't get it. Resistance to the market is futile. You will not sell if you price your property too high. Buyers are not morons. (Usually.)

June 2009 saw 20 condo and townhome sales in the Key West area. Seven of those sales were in the Old Town and Casa Marina areas. Those units sold at an average sales price of $484 per sq ft. One of those sales was in excess of one million dollars. In 2010 there were 13 condo and townhome sales that closed in the month of June. Three of these sales were identified as short sales and two were shown as bank owned. Five of these sales were for units located in Old Town and they sold at average price of $505 per sq ft. None of the June 2010 condo or townhome sales was in excess of one million dollars. The number of sales was down but the price per sq ft increased by almost 9.6% over last year. Mixed blessings, perhaps.

I have previously written about the time I did commercial loan workouts for a couple of big banks in Denver. Later I worked for the Resolution Trust Corporation which oversaw the savings and loan mess in the early 1990s. I have seen lots of lows but those lows were always followed by highs. I expect the same will happen this time around.

The BP oil spill put a big dent in what was a good uptick on real estate sales in Key West. I have recently heard that some buyers have backed out of contracts because they fear what will happen to Key West if oil does reach here. When some totally unrelated tar balls did hit Key West beaches a few weeks ago, the national press pounced on the story. Those tar balls were not from the BP oil spill, but that news was not as stunning as the initial report. The damage was done.

When prices are high potential buyers are often willing to settle for less than they really want. They think they can do a little fixing and save a bunch of money. But when there are few houses to pick from, some buyers may be willing to buy properties they would not normally consider just to get a "good deal". I have been inside too many houses in Old Town that reek of cat pee. Some of these places are tenant occupied but others are owner occupied. I guess you have to be a cat lover not to notice or care. Yesterday I took pics for an out of town buyer that was interested in two houses. I took photos of one in the morning and a second house late yesterday afternoon. The morning house had the distinct odor of cat pee in two areas, one of which was carpeted. Maybe replacing the carpet would eliminate the problem. Maybe not. The other place is located across the street from a neighborhood restaurant that is open everyday of the year. I told my buyer he could smell garlic everyday if he bought that house. He said he preferred the smell of garlic to cat pee. What a option!

I see the political and economic negativity as being an omen for the better. There are a group of of buyers sitting on the sidelines waiting for the right moment to buy. I think some buyers hope the economy will dip down further which would create more unrest and drive prices down even more. Maybe those sideline sitters will decide to buy then. There is another set of buyers who sense that buying opportunities may have passed them by. I am getting the sense that they may be willing to buy inferior properties today (such as houses that smell of cat pee or that have really serious locational issues) rather than holdout for better (and more highly priced houses in the future). I don't suggest that any buyer buy a cheap property just because it is cheap. Cheap can become very expensive.

When the economy does improve and when we know whether Duval Street will be lined in oil or still just dirty tee shirt shops, I expect prices will rise to meet the demand of people who were afraid to buy into the uncertain market. Those buyers will surely pay more for their place in Paradise, but they will feel better for it.

If you are looking for a place in Paradise, please call me, Gary Thomas, 305-766-2642 or send me an email at I am a full time Realtor at Preferred Properties Coastal Realty, Inc. in Key West. Let me help you find a place where cat pee and garlic fumes are not options that you need to consider.


Anonymous said...

I'd prefer garlic over cat pee.

You are right--there are some sellers that still just don't get it. But if they don't need to sell they will just ride out this market and bleed slow losses (monthly taxes, insurance, maintenance) instead of pricing aggressively and maybe taking a hit up front.

If some of those homes priced between $1 million and about $1.3 million came down into the $900s it would open them up to a whole new market of buyers.

Of course, you and your readers probably already know this.

Gary Thomas said...

"I'd prefer garlic over cat pee."

I deleted several paragraphs before I hit the POST button. I have a story to tell about cat pee and really dirty old men. I just don't want to get sued.


Anonymous said...

But there are some buyers who get it. We just maybe on the start of the third deprission and prices will be lower and penicles will be sold on Du

Anonymous said...

My wife and I have been in Real Estate for about 20 years. We have been working BPO's (broker price opinions) and REO properties for the last 3 years in Maryland.
We don't see prices stabilizing for some time.

I personally don't think it will be over till prices get back to the 2002-2003 levels.

It may be different for Key West,
but with high unemployment and looming tax increases on the horizon this could take years to straighten out.

Anonymous said...

I agree - but in Key West the just don't get it like they do everywhere else. Unemployment, taxes, unstable economic climate, the current administration, etc. makes it obvious the everyone that even with record low mortgage rates no one is buying a second home in Key West nor are locals buying into the market. As long as we have realtors who keep pushing the phrase 'it's a great time to buy' we will contiune to judge them harshly.

Gary Thomas said...

Key West is not everywhere else in America and Thank God for that. People who do not have a job here are either rich and do not need to work or do not work by choice because there are jobs here. Maybe not the jobs white middle class Americans want, but jobs.
We have no state income tax so the Anon who complains of taxes must mean real property taxes (which are low compared to NY, NJ, MA, and many other northeaster states. Obama is getting blamed for everything including the streets in Key West because the Stimulus Package is being spent here to help our storm drainage.
Mortgage rates are historically low.

Mr. Anon is mistaken about people not buying second homes and first homes in the Keys. Because they are. I wish they were better but crybabies scare and fear mongers keep things stirred up.

Before the huge market rise in the mid 2000 we experienced an average 10% price appreciation each year, year over year. That was probably a lot better than elsewhere in the county where there is lots of land and in some places large population growth. Key West is different, our growth is confined because of space, height, density, and political restrictions. Demand for housing does not go away. It is pent up.

People in big cities, especially along the east coast, want to buy a place here where they can have some peace, quite, and a little place to call their own. They can afford it and they can buy today at a much better price than five years ago. Be as harsh as you want, they buyers will be the victors and those that sit on the sidelines griping can continue to gripe.


Anonymous said...

I guess I would classify it as "Different" in KW. When I walk my dog around the streets of old town, I see numerous renovations going on. Economy doesn't seem to be bothering those people. I sort of take the Rush Limbaugh view on a recession and "choose not participate in it". And on the cat pee issue, the previous renters in my house had a cat. Even after the floors were sanded, and refinished, you could still smell it. I think it was eventually coming from under the house where a stray may have been living. So now I have a dog and the cat pee smell is gone...



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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.