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Monday, February 8, 2016

Who Needs to be a Millionaire in Key West?

I have been selling houses in Key West to folks from up north in America for twenty years. Most of the people I have worked with visited Key West on several different occasions before they succumbed to the lure of living the island life. Some are rich but most are people of a bit better-than- normal means. They have saved their money or made good on other investments. Maybe the kids are finally out of school and are no longer a financial drain. Many are looking for a place to retire to in a few years. Some are willing to buy a place they can rent out as a vacation rental while others are open to buying a fixer-upper and doing some hard work to create their dream house in Key West.

We have a limited supply of houses in Key West. State law controls the number of new building permits allocated to the Florida Keys and this includes Key West. This means we can't grow or build that many additional houses any one year and our limited space on this little island lessens the possibility of building new places because there just is not that much undeveloped land mass. The City of Key West has limitations on size, height, and density with further restricts what may be built and where it may be built. So there is an persistent challenge to buy what exists at the best possible price. Since the demand exceeds the supply, housing costs in Key West rise year after year. Twenty years ago a potential buyer could purchase a cute little cigar maker cottage in Old Town Key West for about $200,000 more or less. Today The cost will be nearly one million dollars US.

If you think I exaggerate the price or the supply consider the following. I just searched the Key West mls database for Active Single Family Homes. As of 7:30 AM on February 8, 2016 there are 105 homes priced at $1,000,000 or higher listed as ACTIVE in the Key West mls database.

More startling is the number of homes priced at $2,000,000 or higher. There are 37 of those currently on the market. I then checked to see how many $2 million plus sales we had in 2015 to see if there is a real demand for such expensive homes. I guess there is to extent because we sold 11 of them in 2015. I sold one myself. My office either listed or sold or both three homes priced over $2 million.

I then checked to see how many homes sold over $1 million but under $2 million. There were 56 such sales. Almost all of the sales of homes priced over $1 million and higher were sold in the Old Town, Casa Marina, and Meadows areas. Two sales occurred on Sunset Key and there was one sale in mid town and another in new town. This confirms what I continually write and tell prospective buyers when we meet: most buyers want to buy a home in the Old Town, Casa Marina, and to a lesser extent the Meadows Areas. There are a lot more homes for sale in the mid-town and new-town areas, but those are not typically areas where second home buyers typically look. Maybe they should. But they normally do not.
I know from experience that most million dollar plus buyers pay cash for their homes. I think that is pretty much a given fact in most million dollar sales in Key West. This statement is not meant to discourage future buyers. There are still properties available at lower prices, but those properties are either located in areas where second home owners probably would not consider purchasing or which houses will likely need some degree of improvement. Some may never really be able to improve that much because of lot size, location, or city building restriction.

Here's the catcher: there are 108 single family homes offered for sale in Key West that are priced from $365,000 up. You can buy a nice home for that much up north in America. Here you can buy an opportunity.

I have been having a lot of discussions with other Realtors in my office and other offices about how busy they have been this past month. Many expressed concern that our market was over-priced. We have also had a lousy winter so far. Our typical warm days have been replaced with a lot of gray days and a lot of rain. But most vacationers booked their trips here months ago so I don't think the bad weather has really interfered with real estate enough to have a real impact.

Only 10 single family homes went under contract in Key West after January 1, 2016. The status varies from contingent show, contingent, or pending. The median price for contingent homes is $665,000. There is just one pending sale with a "median" price of  $1,400,000.

We have just begun the second month of our selling season. I wonder how many of the million dollar buyers we will see in Key West this year. I wonder how many sellers who have their homes listed for over one million dollars will sell and how many will not. And since we only sold 11 homes priced over $2 million 2015, I wonder how many such sales we will get this year. The stock market has not been our friend of late. I don't think we have been impacted by the ZIKA Mosquito Virus. But I am sure it will come into play sometime. Yes we do have a demand for quality homes in good areas. I just do not believe we have as many buyers as we have properties for sale.

If you are looking to purchase a home in Key West and need a buyers agent, please contact me, Gary Thomas. I am a full time Realtor at Preferred Properties Key West. CLICK HERE to see some my recent sales. I am always looking for more new business. I am realistic about pricing on both the listing and buying side.


Anonymous said...

This is all so funny to me. And sad. Realtors bought listings and now said listings are getting stale. These realtors are spending big money marketing the properties they had to buy with big number promises to sellers. Soon the sellers who are serious will list with someone new and drop their prices. Until then both owners and agents lose. Nobody is paying these prices. It's simply absurd.

Gary Thomas said...

Dear Anon,
I tell people who call me to list a house that we should list close to where we actually expect to sell and not to list at some crazy price. Realistic prices attract buyers and absurd prices make the potential buyers and smart agents shy away from looking.

There are a lot of smart buyers out there. When I meet some for the first time I often see them with notebooks and spreadsheets about current properties and past sales. Some may know our market better than some of our agents. (Seriously!)

I did not mean to infer that everything is over-priced. But a lot is. I do know we do not have enough million dollar buyers for all the houses that are offered. I know for damned sure we do not have enough buyers for the huge supply of $2 million plus houses.


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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.