The Poseidon Adventures in Real Estate

Way back on January 4, 2007 I wrote an item on this blog about Real Estate Cycles. GO HERE to read the item in full. But the gist is that there are a series of "events" that make up a "market cycle" including: euphoria, denial, recognition, panic, hope, and finally capitulation. I think we are in the capitulation phase right now in Key West.

I have often written about the historic sales season for Key West real estate that coincides with the regular tourist season. It has always worked the same way. Sellers list their homes for sale at the start of tourist season in hopes that their property will be exposed to the widest audience of potential buyers during that time frame. Tourist season begins at Christmas and ends at Easter. The Buyers disappear after Easter. Or so it seems. So the sales season is about 120 days long and sellers desirous of getting a deal done must do his best to get it done within that time frame.

This season things are very edgy. It's like The Poseidon Adventure in Real Estate. The world as we know it has turned upside down. We know the path to where we want to go is filled with formidable obstacles and treacherous waters. If we make a mistake we stand a good chance to sink with the ship. And even if we make it through the obstacle course, chances are good that we will have scars and memories that will never go away.

At the bottom of almost every blog entry I provide a link where buyers can search the Key West mls database. Buyers can see the same basic info that Realtors get to see. And see it in real time. What you can't see are the daily entries of new listings, price reductions, contingent sales, pending sales, solds, and expirations. But I can. And the number of Price Reductions that are happening is alarming. There are not just a few. There are a lot--everyday. It's like the sellers are finally coming to the realization that we are near the end of the first month of our sales season and that if they have not been getting any positive action on their property that maybe, perhaps, probably their sales price is too high. "Duh!" to quote Homer Simpson.

Yesterday for example one Broker/Owner reduced the price on four separate over-priced properties the Broker/Owner owned and this time included language that each individual may become a "Short Sale" requiring lender approval (shorthand for loan forgiveness) to get the deal accomplished. I specifically recall showing one of these properties in the early summer of 2005 when it was priced just around $1 million. Today it was reduced to $395,000. And it isn't even worth that much. I think the Broker/Owner has finally capitulated.

Yet there are still Realtors listing properties at prices that are out of touch with reality. You will note that I normally recite the price per square foot when I discuss a particular property. That is so the reader can compare other properties to make an evaluation of the real value of the particular property I am discussing. There are a few properties that are so well located and so perfectly done that they may qualify for an astronomical asking price, but the emphasis is on the word "few".

It will be interesting to see how the asking prices shake out during the next three months. The properties that are selling right now are following the traditional Key West sales pattern for years gone by: high end, very low end, and very well located and well priced Old Town homes. The stuff in the middle just languishes. If the market cycle theory holds true more and more sellers will capitulate and that, in turn, will drive more and more prices downward.

The Key West Association of Realtors is conducting a seminar today on Foreclosures. Imagine that. I managed foreclosures for a two major Denver banks for years. It will be interesting to see how much real world knowledge the lecturer can impart in the discussion. It will be equally interesting to see what kind of crackpot questions some of the Realtors come up with. They always do.