The Last 10 "Just Listed" Homes In Key West Prove Real Estate Has Been A Losing Battle In Building Wealth Since 2003

Anybody with half a brain and willing to search the Internet in 2003 for contrarian advice knew that Real Estate was a giant Bubble blowing.

Unfortunately, the Mainstream Media was in denial during the worst years of the Housing Bubble excesses

Even in Key West's local rag, "The Key West Citizen", we saw local Realtors and other teat suckers on the FIRE Economy Pig telling us time and again why Real Estate would never go down.

Indeed, most everyone in this town in 2003 would have you believe there wasn't even a Bubble blowing, that Key West property was only assuming its natural destiny of much higher prices. The reasoning behind these audacious claims were many, and some of them are being dusted off today during this new claim of a bottom: "Everyone wants to move to Key West. We are only a 4 mile long by 2 mile wide island. Get in while you can. Prices will continue to double every 3 to 5 years. Demographics and population growth is on your side."

Back during the manic buying of the Housing Bubble, there were few sage voices in the wilderness who were calling out against the insanity. I know of several honest local Realtors who were cautioning their clients not to buy. I knew another blogger from this island who once had a Wall Street background warning against the "irrational exuberance" we were seeing in Key West Real Estate. And I met and befriended many a sage writer (Michael Shedlock for one) on Motley Fool boards who were not fooled by the biggest Ponzi Scheme of all time being erected under the noses of the American people.


Purchases since 2004 flash forward to 2009

I've been telling readers of this blog for the past few months that my personal Excel spreadsheet of Key West MLS data, which I go to great pains updating every week for the past two months, is now showing me more and more homes and condos bought in the year 2003 are now upside down. That is, more than 50% of homes/condos bought in 2003 and going back on the market today are listing at 2009 prices less than what they last sold for in 2003.

To say this claim of mine has touched a raw nerve is much the understatement.

I've actually two locals stop me this past week and tell me this claim cannot be right. They disbelieve that houses and condos bought 5 years ago (2004) are almost all upside down and when coming on the market today are asking prices less than where they were purchased in 2004.

I patiently explain to them what I have said several times here, "90% of all Key West properties (and almost 100% of all condos) bought anytime during 2004 are now worth less today . . . and that figure is only not higher because many of the same properties which are asking more had extensive renovations."

These people asked me to show them more proof. They are like 99% of all Key West workers who are believing some bottom is forming: they will only disbelieve the "green shoots" story that so many FIRE Economy poobahs are pushing today if they can see data to prove the "bottoming" pushers in the Mainstream Media and Academia are wrong.

So, today's blog is addressed to these two new readers of this blog. Welcome aboard, and please read the archives. But now, let's advance my observation that buying a house/condo in Key West from 2003 through 2008 was a losing proposition.



More home listings are still falling in value and are trending downward below 2003 prices now

It was only this week I noticed that the majority of Key West properties bought in 2003 and coming on the market today are listing at 2009 prices which are lower than where they last traded hands in 2003.

This is something I've been predicting would happen as more and more shadow inventory sold at foreclosure puts pressure on pricing, while more people default on their mortgages and credit cards while yet more of these same people lose their jobs.

I also predict prices will continue to plummet as even more people lose jobs, fewer people up North are able to sell their homes and move to Key West, and consumers continue to default on credit card payments and go bankrupt in ever accelerating numbers.

In short, why will Housing "recover" now when the pool of eliglible buyers for these unaffordable units continues to evaporate?



Let the numbers do the talking

So, every once in a while, I think I'll do a little exercise whereby I find 10 of the last listings of used inventory (not brand new condos or townhomes) and simply post their new listing prices vs. when they were bought and at what price. By doing this, more locals will have a better understanding that all this table pounding by local members of the NAR over the years has been nothing more than their usual desire to line their pockets with your hard earned money.

Soon, I will subscribe to the Key West Citizen online. I will take quotes from Regina Corcoran's column over the years extolling one and all to buy, buy, buy at the exact wrong, wrong, time of the market top. I will resurrect the quote from a local Realtor who claimed we would never see Key West homes sell for less than $600,000 again. And we'll take actual quotations from bigshot developers and Realtors throughout the Keys who kept telling us "It's different this time," and who urged everyone in Key West to buy as the Bubble inflated and deflated.

By the way, I'm having problems accessing the county government website this morning, so I am using "Last Sale" data supplied by Zillow. (I for one think Zillow "Zestimates" are a bad way to try and figure out a property's worth in these days and times as Zillow blows the "comps" in many cases by comparing apples to oranges. But their "last sale" data is for the most part uncompromised.)

Also, I'm not going to print the addresses, etc. You can access an MLS online with dozens of Key West Realtors. Simply punch in the MLS number I will supply here. Where there are photos, I'll go ahead and add those to my list here.


Here are ten of the most recent listings of lived in inventory:

Example 1

MSL #111266
Listed 7/24/09 at $425,000
Last Sale 11/17/06 at $600,000

Says on the MLS that this home for sale is "Realtor Owned". Well, the Realtor who paid $600,000 for this home just 2 years and 8 months ago is probably wishing he/she never drank the local NAR Kool-Aid.

This Realtor is trying to unload this house at a price which is about a 30% discount to where it was last purchased.

Tell me again how Real Estate never loses value, Mr. or Mrs. Realtor

Example 2

MLS #111267
Listed 7/24/09 at $350,000
Last Sale 12/20/06 at $465,000

That's a Merry Christmas present from 2006 which quit giving value to this homeowner. This one is 25% off from it's purchase price just 2 years and 7 months ago. (Don't make me go searching the Key West newspaper archives for local NAR ads telling you how it was never a better time to by Real Estate back then.)

Tell me again, David Lareah, why Real Estate would perpetually boom from 2006.

Example 3

MLS #11268
Listed 7/24/09 at $399,000
Last Sale 9/18/03 at $448,000

This is one of those Golf Club townhomes. It's down 11% from it's Sep. 2003 purchase price.

I'll bet we'll see it eventually drop to $299,000 or below. Regardless, if this seller can unload this place at their ask of $399,000, they will still have to pay that 6% commission, or $24,000 grand, to the Realtor(s).

By the way, I knew an agent who booked bands at Sloppy Joe's. He lived in Maryland. He bought one of these townhomes while he was down here watching one of his acts. He got the idea back in 2003 that a Golf Club townhome would be an excellent "investment". He bought at $550,000. He was recently foreclosed upon.

(Note: I am skipping over the next two listings. One, MLS #111251, is at 901 Flagler for $3,250,000. I cannot find any 901 Flagler on Zillow. My guess is 901 Flagler, a corner location, may have an older address on Reynolds. I'll look into this one more closely when I can access county records, but at the same time, if memory serves, this is one of the massive renovation projects I've seen in the Casa Marina area. And massive renovations make a same address "comp" no longer valid. The Flagler place might just have more value than a normal depreciated home. (For more on great values in Key West Real Estate, be sure to see Gary Thomas's great blog on hidden gems in Paradise. He's quite credible and a great read.)

(Also, the next in line was MLS #111256, a brand new, still under construction home up on Summerland Key. No need to investigate the previous price on something which has never sold.)

Onward.

Example 4

MLS #111259
Listed 7/23/09 at $218,500
Last sale 2/24/05 at $635,000

That is what I'd call "Equity Wipeout".

That's close to a 65% drop in pricing!

And check this out: this is another of these Golf Club townhomes such as the one above which was bought in late 2003 for only $448,000. Can you imagine one of these places rising $187,000 in value between September 2003 and February 2005?

There's a testament if there ever was one for "irrational exuberance" in Real Estate!

Example 5

MLS #111261
Listed 7/23/09 at $325,000
Last Sale 5/19/05 at $635,000

Here we go with another one in the 50% loss range. And this one comes with a transient license so you can rent it out on the short-term.

Is it a great value now?

Is the Pope Jewish?

But go ahead, knock yourself out, become a landlord and try to make money in a Recession where room rates in Key West have come down this year, not gone up.

Nevertheless, how would you like to be the seller who drank the National Association of Realtor's Kool-Aid in 2005 and who four years later is sitting on a 50% loss (and more if they used creative financing such as Interest only loans, Option ARMageddon loans, etc.)

(Sorry, no photo for this listing at this time)
Example 6

MLS #549274
Listed 7/22/09 at $500,000
Last Sale 4/21/04 at $550,000

This one is only down 9 to 10% in 5 1/4 years. Not bad. But remember, the listing price is the first price it "lists" at today. This listing is up in Sugarloaf Key.

This entry has no info other than it's address and that it has 3 Bedrooms and 2 Baths. Still, using other sales in around this home, I'll be surprised to see it drop its asking price several times from $500,000.

(We'll keep an eye on this one and see if my hunch proves true.)

The thing to point out here is the last time this property traded hands was in 2004. And here were are in 2009 and the new listing price today is under the price from 2004 by 9 to 10%.

Real Estate always goes up. "If I say it enough, it will maybe happen," said the Kool Aid drinkers to the Scam Artists.

Example 7

MLS #111239
Listed 7/22/09 at $459,000
Last Sale 5/24/05 at $812,000

This home is in the very desirable "Meadows" neighborhood between White and Eisenhower Drives. Still, when the tide goes out, all boats, big and small, find themselves lowered accordingly.

This one is about 44% off its 2005 sales price.

That's a lot of equity to lose and you were to hold onto this property, I'll bet you would not see that $812,000 price you paid in 2005 by the year 2020.

(And in fifteen more years, we'll have a better fix on just how fast the sea level is rising, making many Key West properties all the more less valuable.)

Example 8

MLS #111245
Listed 7/22/09 at $1,795,000
Last Sale 3/20/08 at $1,565,000

This is my favorite dream home out of the ten I am talking about on this blog today. And were I a Bankster who made off with millions of scammed dollars in unwarranted bonuses built on bilking foreigners and Americans out of their money and tax money, I'd retire here in a heartbeat, build a big fence around the yard, install a security cams all over the property, and hire some Blackwater goons to protect me from the growing angry mobs.

But I am not that sociopathic or psychopathic Bankster, so, my question is who will buy this place?

Who can get the financing for this place at this time when Prime and Jumbo loan defaults have almost doubled in less than one year?

Banks have tightened credit. Lenders are not giving out loans to "preferred" borrowers as freely as they used to. Even Commercial Real Estate has begun to crash all over the USA. Hence, big spenders ain't getting the money they used to get from the Big Lenders.

For this place to sell, a cash holder with an Optimist Streak must step in. Or someone with a huge downpayment and a family member in a bank will need to come in here and buy this property at a higher price than what it sold in 2008.

My guess?

The current homeowner sitting on this beautiful property with an imagined 15% gain is going to be very lucky if he/she can unload it at March 2008 prices. It did say in the MLS description that this house recently saw its kitchen renovated. I don't know if it was by the current owner or done a few years ago. Still, I don't see a $230,000 wanted gain happening simply because a kitchen was renovated on an already expensive home. I don't for one minute think the current owner will get his/her just listed asking price.

More so, I believe this beautiful home will drop by hundreds of thousands of dollars if it can't move within a year's time. Mark my word, the coming tsunami of defaulting Prime and Jumbo loans and Option ARMs mixed with the "Stealth Inventory" on banks books and not shown on the MLS are going to take its toll on the high end homes . . . homes which just started to seriously implode in price a few months ago.

We'll keep an eye on this one.

(Sorry, no photo for this entry at this time)
Example 9

MLS 549282
Listed 7/22/09 at $169,900 (Bank Owned)
Last Sale (not counting the sale back to bank) 12/29/04 at $500,000

This is one of those "Smurf Village" quadplexes. Although no photo for the exact address of this listing is shown, we all know these townhomes looked the same when they were first built.

In all fairness, the description for this home mentions:

Nice unit with new bathrooms and kitchen, renovations complete in 2005, Jacuzzi on front deck. Tile floors. Property is bank owned, and priced to sell

To which must add in fairness the following thought:

If the home was bought in 2004 for $500,000 and it was extensively renovated (let's say another $100,000 was tossed into it), does this not add more credence that most Key West homebuyers who bought in 2004 are now upside down on their mortgages? (There was a time about 12 to 18 months ago when maybe 20 of these quadruplexes were "Short Sales" and it seemed like every other one was "Realtor Owned".)
The bank took this baby back from the Renovating homeowner. And the bank is trying to unload it at $169,000 which is a b-i-i-i-i-i-g loss on their books (especially if the bank was stupid enough to have lent 120% LTV so the last owner could do renovations.)

But for our purposes, let's be conservative and say the last owner had $550,000 in this place.

Let's see. This would mean the bank is sitting on a 70% loss, paying taxes and maintenance and insurance, while waiting on a buyer to snap up this "deal".

As I just said in another recent blog post, this is the Bizarro World Smith Barney saying of,

We lose money the old-fashioned way . . .

We buy high, we sell low

This one might sell at it's listing price. Still, it doesn't negate the fact that someone over paid for the property in the first place, then renovated it (most likely hoping for a flip) and got stuck right when the market starting turning South in 2005-2006. (I called a market top in 2005. Case/Shiller claims it happened in 2006 using median pricing . . . which I know can be manipulated by the NAR).

Okay, so this one might be, maybe, possibly, be a value to someone out there. Not me. But there might be someone in our workforce who considers this Smurf Village Renovation a much better price than say one of those new"Affordable Homes" which are built on Stock Island and going for $299,750 and which are actually going UP in price at the developer's discretion.

I say this one sells at or near it's current price. And a few years from now, the new owner will unload at an even cheaper price.

Example 10

MLS #111237
Listed 7/21/09 at $145,000
Last Sale 9/29/04 at $350,000

This is one of those smallest of units at Las Salinas condos, a one Bedroom/one Bath with less than 500 square feet of space. You could put five prison cells into one of these, but six would be too big.

There are so many vacant Short Sales units in Las Salinas and there are so many more foreclosures coming, that I would caution all "investors" and wannabe homeowners to not even consider buying here without first investigating complaints from people living in Las Salinas. (Owners and renters are extremely agitated over parking issues at this time.)

I predict these condos will finally descend to and possibly go lower than their brand new prices when they were first built in 1991. I also firmly believe that the current "good" owners who are current on their condo fees will soon be faced with "special assessment fees" to take up the slack on all these units which are going into Short Sale.

This is all just my opinion, but we shall see how it all plays out.

Regardless of what I think, Example #10 was bought in 2004 and at today's optimistic price (in my opinion) of $145,000, this still might seem like a "bargain" to some blue collar worker who isn't savvy and hasn't done his/her homework.

More on condo living come September posts to this blog . . . but for now . . . if you're out there looking at Key West properties, be sure to just look over these 10 examples, notice how 9 of them are now at much reduced losing prices, and remember back to 2004, 2005 and 2006 when everyone you know in this town, especially Realtors, were pounding the table to buy, buy, buy Real Estate or you would be priced out of the market.

Tell that to the last owners of 9 of these properties I've highlighted today.

As always . . . Caveat Emptor,

Rock Trueblood