One block away from the Intersection of Eisenhower and Truman the morning after Hurricane Wilma left town in 2005.
Wilma's chest deep water in Bayview Park submerges cars and trucks
This tree crunched a car which was already ruined by Wilma's flood surge down at Fleming and Frances
This is Reynolds Street on the side of the Casa Marina. The Casa, Louie's Backyard, Higgs Beach, the Reach, and others on the beachside
all lost their piers and cleanup and repairs took weeks and years. And Wilma was only a Category 1 Hurricane!
Wilma closed down South Roosevelt (A1A) for a few weeks. Smather's Beach was washed away.
Hotel rooms by the airport flooded. Again, Wilma was only a Category 1 when it hit.
Key West plays Hurricane Lotto
and wins this time.
Ten or so nights ago, I watched a Miami meteorologist show an extended 5 day cone from what was a category 1 storm in the South Atlantic called Hurricane Ike. He divided the cone into halves and he said computer models were showing Ike would "most likely" track into the Northern half. Hence, he advised all of Homestead, Miami, Ft. Lauderdale to start preparing for the worst as Ike was sure to pick up speed by the time it would hit South Florida.
That night, Key West was breathing a sigh of relief. We thought we'd be catching winds from the bottom side of the Hurricane . . . which if you know anything about Hurricanes is the weak side.
As time progressed, Miamians were shown in one nightly newscast after another cleaning out grocery stores of batteries, bottled water, food and the like. Dade/Broward Home Depots had trucks bringing in tons of plyboard, shutters and generators every hour.
Meanwhile, we in the Keys continued to party on with the gutsy gals who came down for Womensfest. Without them, the town would have been the ghost town it became later that weekend . . .
And then Hurricane Ike turned down instead of up
A few days later, the same meteorologist was now showing Key West or the Lower Keys would be the strike zone of Hurricane Ike's eye. At that point, Ike was a Category 3 and it became a 4 for a few hours before reaching Cuba.
As Ike started dumping on Haiti, our county and city mayors, using what information was available at the time from the National Weather Bureau, decided to call for a mandatory evacuation of all tourists on Saturday, September 6th. All the closing ceremonies for Womensfest were cancelled or abbreviated and pushed to Saturday before the gals got on the last planes out of town or drove their rentals up to Miam/Ft. Lauderdale airports.
Next, Ike skated below Cuba . . . and by Sunday we realized Key West would not get hit.
I wouldn't want to be either Mayor at this time. The town has opened the criticism spigots full blast.
The Mayors of Key West and Monroe County were using the best info from the Hurricane Center in Miami and the National Weather Bureau here in Key West. They had to order evacuations. There was no choice of waiting til the last minute.
And as it was, the winds from a hurricane hundreds of miles South of us made air travel impossible for 36 or more hours in Key West. And the wind alone chased even the hardy locals off the streets and into private Hurricane Parties were the mayors were roundly derided for closing down the town.
(Note: name an outdoor bar in Key West, and I'll show you a place where it would have been impossible to conduct business with the way the wind was howling Sunday night and all day Monday.)
And now, in the Key West Citizen's "Voice of the People" section a week after what was just another Hurricane Warning false alarm for an island which is dependent on tourists, the military, a bit of fishing, and Real Estate to survive, locals are calling for the heads of our mayors.
I don't get it. Yes, people evacuated. But no, not many people want to come to Key West during 50 to 60 MPH windstorms mixed with rain which feels like sleet hitting you in the face. What do you do? Lie to tourists about the weather so they'll stay an extra day which they will not enjoy because the weather, albeit not a Hurricane, is simply not weather they'd submit to going out in back at home?
Read the Complaints and Shake Your Head
Not one Key West complainer I have read or talked to has yet to confront the "What If" scenario which could have been the last torpedo needed to sink Key West's tourist and Real Estate economy.
Had Ike bowled perfectly down "Hurricane Alley" (i.e. The Florida Straits between Cuba and the Keys) and curved into Key West as a Category 3, 4 or 5 storm, Key West would be in full blown China Syndrome type Real Estate meltdown, instead of this slow agonizing death spiral we have been experiencing since the market top of August 2005.
Why do I say this?
Northerners, I want to drive this into your brains: Hurricane Wilma in 2005 was only a Category 1 storm when it hit. In fact, the storm surge came after Wilma's winds had died down.
I posted the photos above just to remind starry eyed wannabe buyers what Nature can do to your home or "investment" in just a few hours.
Hurricane Ike missed us, but the Category 5 Hurricane in the financial markets will continue to depress Real Estate worldwide
You've seen the bumper stickers, "Think Globally, Act Locally?"
Realtor's in Key West should have one saying, "Think Locally, Forget Globally!"
Just two years ago, the woman who gives bi-weekly opinions about Real Estate in the Key West Citizen was urging blue collar workers to use their credit cards for down payments as (so she claimed) Key West Real Estate was on sale at bargain prices. Mind you, this advice was given after only a few months of declining sales and growing inventory. Imagine the sage advice of telling a hardworking man or woman, who depends on a Realtor to help them become homeowners, "Go ahead. Rack up $10,000 on your credit cards for a minimum 5% downpayment. Never mind the 23 APR rate of your credit card. You can do this Einstein" (Note: I'm paraphrasing what the genius advice giver said in her column.)
This past Sunday, this same woman is recommending that "short sales belong in the history books as soon as possible." She goes on to note that of the approximately 900 to 1000 properties in Key West today, 392 of them are short sales listings with 123 of these "under contract".
What this woman doesn't mention is the number of these short sales which are Realtor owned. There are scads of them with "Realtor owned" next to the words "Short Sale, must be approved by the lender."
What this woman doesn't mention is how credit markets nationally affect local lenders who can no longer make Liars Loans, Ninja Loans, Zero Interest loans, Negative Amortization loans, ARMs, or LTV loans over 80% any longer. Does she not know Americans have the highest level of debt in history and can no longer afford to consume?
This woman suggest the lenders should simply "close out these short sales" by agreeing to lose money on mortgages they sold to people who now want "relief" before they are forced to be foreclosed upon. Again, keep in mind many of these wannabe millionaires who are now hoping for a short sale are Realtors on the hook for more than one "investment" property which has now turned against them.
In other words, she's telling bankers, "Hey, sell the home at a loss to some other bagholder who thinks the market is going to go up from this point forward." But here's the biggest flaw in that thinking: there just aren't enough new bagholders to go around taking bad investments off the hands of speculators and lenders. The general public has smartened up and the general public can't get loans like they used to.
Thus, the banks are stuck with many Short Sale wannabes where no buyers have materialized. And when you've got a lot of speculators who are also Realtors upside down by 20 to 50% on their mortgages, why should we care? Hey, if a Realtor was dumb enough to believe his and his industry's own hype back in 2004 or 2005, why should anyone feel compelled to tell a lender to bail out these industry insiders? Let the Real Estate Industry speculators suffer like the people they helped con into thinking Real Estate always goes up in price.
Lenders don't have to loan anyone money if they think a property is going to continue to lose value. The reason so many short sales stay on the books for so long is lenders don't want to make another bad loan on the same property. The lenders, like Realtors and Sellers, are looking and hoping for a "bottom". Foreclosure is the last thing banks want to do. That's why Short Sales are taking so blessed long.
If lenders were to all adopt the idea in the same month to "Settle all our short sales NOW!" it would further erode Real Estate values still on the MLS. Real Estate values would drop much deeper and more quickly than they have already. You think Realtor's are singing the blues now? Go ahead. Sell off the all the short sales for a loss to lenders and see Key West property values fall another 25% overnight as "comps" in the same neighborhood are forced to adjust downward and lenders kill off lending to anyone with less than 20% down. (And 20% down is going to become the new norm soon enough, what with banks needing loans from the Fed to pad their "fractional reserves".)
This same Real Estate maven says there's another way out of this mess: "Let the lenders foreclose. Then we Realtors can negotiate sales for our buyers with the bank owner. In my experience, banks are much more motivated when the inventory is on their books and they are paying for taxes, insurance, maintenance and damage." Well, hoo-hah to you. You want the lenders to be the last bagholder because you think they have the deepest pockets or something? What about the big commissions the Realtor/Speculators were making during the go-go years of the Housing Bubble? Why didn't any of them put some aside to see them through possible bad times.
If a bank forecloses on a speculator, the speculator loses nothing except his credit score. If a bank forecloses on a homeowner, the homeowner loses a house he never owned. The homeowner who is upside down on a mortgage feels a giant ball and chain has been unshackeled from his ankle. He then goes out and rents a comparable place for much less than his old mortgage (plus taxes, insurance and taxes) and he has no more headaches.
Our Real Estate maven suggests banks can bailout unwise speculators by foreclosing on them en masse so as to get over the pain quickly. Except there's a big, big problem with that thinking too: when banks take back properties in foreclosure are, they must book those foreclosures as losses on their books.
Everytime a bank books a foreclosure it has to add more cash money to its "fractional reserves" to cover future losses. Hence, as more foreclosures come onto the books, banks are forced to borrow from one another, the Fed and by selling loans to Fannie Mae and Freddie Mac. That's why the system is broken now: banks have so many bad loans on their books, many of them are now insolvent. Investment banks sold off so many packaged bad mortgage backed securities, buyers are asking for their money back, mortgage insurers have gone bankrupt, and derivatives bets on all this junk are blowing up like H-Bombs all over the planet.
So, a local Realtor/Contractor/Mortgage Broker/Appraiser thinks she has solved this country's biggest Housing Crash since the Housing of Crash of 1928, yet she, like Sarah Palin, hasn't thought past first base on the unintended consequences of such flippant actions.
Mind you, this is the same woman who has been making a case for all blue collars to "buy, buy, buy" during the slow painful collapse of Real Estate in the Keys since 2005. Never once did she stop to write a column about the "costs" of buying vs. renting.
This woman still has Real Estate Fever. Her vested interest sickness has never once subsided so that she would write an objective piece cautioning would be buyers to sit on the sidelines and wait this out. That type of advice is not going to put food on her table.
Ignorant buyers who listened to and who were persuaded to buy after reading her prattle were not aware of the pitfalls of buying hyper-inflated Key West Real Estate during times where Realtors are begging for short sales from their lenders, lenders are going bankrupt because Americans can't make or refuse to make any further mortgage payments on fast depreciating homes or condos, and more blue collar workers are losing their jobs as government downsizes, the Tourist Recession forces more businesses to close, and Key West continues to face more hurricanes than normal during these denied "rumors" of Climate Change.
Many a poor Key West homeowner listened to such an expert at the wrong time. I can't tell you how many of my blue collar friends have been foreclosed upon, or who are struggling to make payments on a mortgage which is twice the current appraisal on their home . . . all because they trusted the advice of some jackass muckety muck in a Century 21 gold jacket, or a mortgage broker who put them into a higher priced loan because the broker would make $30,000 off the deal, or they trusted an appraiser who was already in a lender's or Realtor's pocket and who gave a highball appraisal so the lender and Realtor would make higher commissions and continue to kick a lot of business to the appraiser.
One thing the public has learned in Aces during the past five years: Real Estate is as scuzzy as politics and the stock market. In fact, I saw recently a national poll where Realtors are now the least trusted profession in America. You think?
The National Economy is deflating like the Hindenburg, while consumer prices are inflating.
Real durable assets such as autos, boats and homes are deflating by double digit prices yearly. The majority of American consumers of such big ticket items have zero savings rates. Americans now have the highest debt levels in US History. Because of the current credit market implosions average middle class Americanns can no longer get loans which mortgage brokers used to hand out like beer distributors handing out FREE swag T-shirts in a bar setting.
Rich people with seven houses don't know milk, cereal, beef, sugar, you name it have increased 100% or more in the past 5 years.
Taxi drivers in Key West are now asking for a $1.00 surchage for every fare to help pay their fuel bills. Gasoline has increased from $1.30 a gallon when The Party Which Wrecked America took power in 2000 to over $4.00 today.
And our government continues to lie about inflation and GDP numbers, just to keep class warfare from breaking out and to prevent the government from making COLA payments which keep pace with real inflation.
We are in a shitstorm in this country, the likes of which have not been seen since the Great Depression. And it's going to get worse, much worse.
Last weekend it was the government takeover of Fannie Mae and Freddie Mac. This weekend it was AIG (insurance) begging for a $40 billion bailout, Bank of America (who just bought out Countrywide) buying out Merrill Lynch, and Lehman Brothers going bankrupt. And yet people with vested interests in selling you a Key West property are bound and determined to slant the truth so that you will hurry and force a purchase of Key West Real Estate?
The Real Estate peddlers down here are like Sarah Palin and John McCain: they don't realize "it's the Economy, Stupid!".
Key West Real Estate is not "doing just fine!"
Here are some things to consider before buying anything down here in these perilous times:
1. Late 2006 and throughout last year, the local NAR ran an ad every weekend in the Key West Citizen which stated "It's a Great Time to Buy a Home!" One of the bullets running under this headline reads "Former Federal Reserve Chair Alan Greenspan recently said that housing prospects are looking up. (Quoting Greenspan the next sentence read) "Most of the negatives in housing are probably behind us."
Please note: just a few days ago Greenspan admitted the United States is mired in a "once-in-a century" financial crisis which is now more than likely to spark a recession. To which I say, "Hey Al, we are in a Recession, and have been in a Recession for over 4 quarters if you don't use the bullshit BLS statistics The Party Which Wrecked America hands out to Fox News on its Morning Points to Talk About."
2. Or how about the old Bubble mantra from Key West Realtors which said "Key West Real Estate is doubling every 3 to 5 years." Now the new local NAR ad in the Citizen says, "Key West Real Estate doubles almost every 10 years."
Really?
So if I buy today in 2008, by 2108, a $250,000 condo (in 2008 dollars) would then be selling for $256,000,000? (Go ahead, do the math on a napkin. Double $250,000 ten times.)
Quit hyperventilating, Key West Realtors. Grab a paper grocery sack, place it over your head, breathe in, breathe out, and do some simple multiplication tables. Do any or you really believe a $250,000 condo today will be worth $256,000,000 in just 100 years time?
(If so, the smallest bill in your wallet will be the American $1,000 bill in 2108.)
3. That old Key West NAR ad from late 2006 and and all of last year also pointed out there were 1000 Key West residential properties for sale. That record inventory offered consumers "the greatest choice in decades."
Guess what? Eighteen to twenty-four months after this ad first appeared, inventory still is at 1000 or more properties in Key West. And if you add all the new unlisted condotel units not listed in the MLS, inventory is actually larger today than back in late 2006 and early 2007.
4. Prices are still falling.
Looking over the Good Deeds in this Sunday's Key West Citizen gives you the half the info you need to know: Good Deeds states that a house at 1409 12th Street listed at $430,000 and sold for $385,000.
Okay, that's a 10.5% haircut in the seller's asking price. But what isn't mentioned in the Good Deeds any longer is the "original" asking price of the seller at $579,000.
This means, in reality . . . not La La Sunny Day Real Estate Land . . . the owner had to move down 33-34% from his original price.
Or let's look at the bank owned property (Washington Mutual) at 1211 Catherine which Good Deeds listed at $545,000 and which sold for $499,000 for a 9.5% discount.
What isn't mentioned is this property's original price was $699,000. When you look at that $200,000 discount, the percentage given up by the Bank was 29%.
Or let's take the place I just moved out of (I rented): It was one of three houses and a toolshed "cottage" in a gated compound originally up for sale in 2005 at $4,000,000. Today, the whole property is being foreclosed upon while the owner still holds onto hope he can unload the whole shooting match for $1,275,000. Keep in mind, the taxes and insurance (eventhough he's in the "X" zone, for the first time ever, he was required by his insurer to take out flood insurance at $3,000 per year) runs the owner about $25,000 per year.
Now if any of the above sound like deals to you, think about this: rents are coming down all over the island.
I moved into a beautiful Las Salinas condo for only $1600 a month (cable included). It's got all the bells and whistles, and yet, just 3 years ago, a similar condo was renting for $2000. (I know, I was looking back then.)
(Also, I've recently seen similar sized condo rentals in my same building for a newer, lower monthly rent of $1500. The condo next to ours has been vacant ever since we moved in the 1st of July. The agent is asking $1750. She'll never get it until she drops her price.)
5. Being a homeowner allows you to rent your place out if times get tight.
Here's a reality check for that thought: you will be forced to rent your place at a price which won't support your mortgage, insurance, tax and maintenance payments.
Look, folks, it's like this: the biggest developer of "Affordable Homes" in the Keys, Ed Swift, is forced to "rent to own" his new built "Affordable Homes" these days. And here's another startling fact: there are dozens of condos and some homes selling for "less than" affordable housing prices.
Some questions about Affordable Housing which I hear weekly from friends: Who is buying Affordable Housing where you don't own any of the land under the home? Why would you rent to own an "Affordable Home" which isn't appreciating this year at even deed restricted inflation rates?
Indeed, the workforce of Key West is waking up to the new reality: These "Affordable Homes" ain't going anywhere in this market because buyers on the sidelines are watching free market housing prices continue to fall - not bottom.
6. Let's talk about incomes not keeping up with Housing prices.
We just heard the bad news last week: 6.1% unemployment in the USA. And this in a deflating economy where banks, brokerages, restaurant chains, retail chains, car dealerships and so on are going bankrupt at an appreciating clip. When you add in the government has quit counting people who've just lost their unemployment payments and who've still not found work, you have to realize unemployment, like real inflation, has to be running at somewhere close to 10%.
If you haven't noticed the increasing homeless population in the Keys, you simply aren't paying attention or you are living in a gated community in which you never venture outside the walls.
Hello, Tourist Recession.
Higher gas prices means fewer weekend trips to the Keys. Higher jet fuel prices mean higher airline tickets for flights into Key West while more flights are cut from the schedule.
Tightening credit markets and falling asset prices mean Northerners can no longer tap their Housing ATMs for cruises and vacations.
Toss in legit Hurricane evacuations, and we've got a real mess of an economy in Key West these days.
The Tourist Recession keeps taking toll on one longstanding business after another: the Goddard Gallery, a Boy and His Dog Gallery, the Deli, Dennis Pharmacy, PT's Late Night, Consigning Adults . . . all of these and more have closed their doors this year.
Look over the Businesses for Sale in this town, from longstanding convenience stores such as Millies down near Mallory Square to Sunset Watersports at the still to open Parrot Bay up on North Roosevelt. Or look at the Leather Master on Applerouth Lane, Key West Bait and Tackle next to the 1/2 Shell Raw Bar, or Mundy's Pirate Seafood Business (now located at Truman and White Chevron) and that Big Convenience Store at Simonton and South. All of these businesses I've known and frequented for years. Why are so many of them trying to sell NOW!?
How about the restaurants trying to sell? How about Naked Lunch (remember the successful Clancy's before Kevin died?) still sitting empty after 3 years? Finnegan's Wake is now up for sale. Viva Zapata's building which has been empty for 5 or more years is now being foreclosed upon. Mo's on White Street, Crabby Dick's on Duval, the Mexican Restaurant on Bertha, the IHOP on North Roosevelt, the Wendy's on Duval, the tiny cafe next to the Hogsbreath, and on and on, why are so many restaurants up for sale at this point in time?
As for Hotels and Guest Houses we know the Island City House, the Cypress House, the Curry House, the Nassau House, the Seascape Tropical Inn, and dozens more are up for sale. Why now?
Anybody paying attention to the Local, National and Global Economies knows why.
This town's Realtor's are still in denial.
Real Estate doesn't always go up.
Ask any old timer about the Florida Real Estate Bust of 1928.
Ask old time Key Westers what happened to Real Estate when the Navy left town in the 1970s.
And now here we are in a Global Financial Meltdown, the likes we haven't seen since the Great Depression, and it's getting worse by the weekend.
Yet Realtor's in Key West think the bottom is in on Key West Real Estate?
Caveat Emptor
Caveat Emptor and Keep an Eye on The Weather Channel.
Key West is only one good hurricane away from Key West Real Estate taking the biggest dump in history.
There's no rush to buy a property which can't provide rental income after you've subtracted your mortgage payments, your insurance, taxes, maintenance and other fees.
If "Affordable Housing" can't be given away without "rent to own" schemes, if businesses are going bankrupt and dozens of them are up for sale, if inventory is still in the four digits and Realtors are doing everything in their power to protest too much that people such as myself are doomsayers without a clue, well, then, I suggest you spend a few days sober and simply look over the facts for a second time.
Credit has dried up for 90% of consumers with no down payment. Banks which are over 100 years old are failing. The biggest insurance company in the country might go bankrupt. The FDIC has over 130 banks on a growing list of banks "facing trouble".
Housing Inventory nationwide is at an all time high with almost 19 million properties (not a misprint) vacant. Of these 19 million homes, over 4 million of them were once owner occupied. Meanwhile, 1.2 million homeowners entered "foreclosure" just in the second quarter of 2008. That's millions of people (think families and married couples) entering foreclosure in just the past 90 days.
The few builders still solvent are being forced to drop prices to their existing inventory. This puts pressure on homeowners in new developments to drop their prices should they want to sell. Many of the developments in South Florida which I've viewed personally are turning into suburban slums with windows in brand new homes smashed, doors missing, the insides vandalized, streetlights shot out, "tagging" on the outside of new siding and fences andSection 8 renters moved in next to homeowners who are struggling to make payments.
Toss in the retiring Baby Boomers who are entering nursing homes or downsizing and the Big Picture becomes clearer.
Question to the Kool Aid Drinking Realtors:
Who's gonna buy depreciating assets such as Houses and Condos when the vast majority of consumers are strapped for cash and the whole nation is drowning in DEBT, while the biggest Demographic in US History dies off, downsizes, or is foreclosed upon because they lived beyond their means?
Who indeed?
Why rush the biggest purchase of one's lifetime in times like these?
Eleven straight months of price decline wipe outs
