Red-hot Keys housing market feeling a chill

Brought to you by

Red-hot Keys housing market feeling a chill
Some Keys residents who figured a year ago they were real estate millionaires are now scrambling to unload properties damaged by Wilma's flooding.
BY JENNIFER BABSON
jbabson@MiamiHerald.com

KEY WEST - This time last year, real estate agents along this island chain couldn't keep most properties in stock, as eager buyers snapped up trailer lots, pushed prices for ordinary wooden homes beyond $1 million and spawned bidding wars that had many locals believing they were paper millionaires.

What a difference 12 months make.

After a string of hurricane evacuations culminated in a storm surge that accompanied Hurricane Wilma and left more than three feet of water in many homes from the Middle Keys to Key West, a once red-hot real estate market seems to have screeched to a halt.

''It's kind of flattened,'' said Laura Rolston, an agent with Coldwell Banker Schmitt in Key West.

Higher interest rates and other economic factors haven't helped, either.

What appears to be a slowdown comes on the heels of several years of explosive growth: The assessed value of Monroe County real estate rose 18.4 percent, to $16.8 billion, between 2003 and 2004, and jumped another 27 percent to $21.4 billion the following year, according to the county property appraiser's office.

''It was an amazing increase when we had those two years in a row like that, but it was happening because there was just such a demand for properties down here,'' Rolston said.

Now, it seems, there are plenty of properties on the market and not as many buyers.

The number of sales in and just outside Key West was down 60 percent in January compared to a year ago, with about 78 percent more properties on the market -- 1,299 -- than the same time last year, according to statistics compiled by Coldwell Banker.

The most dramatic downturn occurred in the heavily flooded area from the Bay Point neighborhood off U.S. 1 through Big Pine, where the number of sales tanked by 76 percent.

The real estate chill -- least evident in Key West's tony Old Town neighborhood, which largely escaped the worst water damage -- has been accompanied by major price reductions, as owners try to unload properties whose chief value now lies in their square footage.

Diane Nicklaus slashed the price on her five-bedroom home with a pool and massive lot in the city's New Town neighborhood by $230,000, to $595,000.

But it may have to fall farther still: Like scores of homes in this part of town, Wilma's surge deposited three feet of saltwater inside the concrete home, burned lush landscaping brown and left a legacy of mold.

''I thought people would come and see the lot and say it's a huge place, and I thought it would be gone,'' Nicklaus said. ``That's not happening.''

In January 2005, the least expensive single-family dwelling for sale in Key West was a $599,000 one-bedroom, one-bath house. Total size: 623 square feet.

Now Nicklaus is in the same spot as many locals here whose expectations -- and perhaps fortunes -- have turned dramatically in a matter of months.

''I just wish somebody would make me an offer,'' sighed Key West resident Kim McGee.

One year ago, McGee thought she was on the verge of becoming a near-millionaire when she placed her family's three-bedroom New Town home with an in-law apartment on the market for $995,000.

Now she's asking $837,000, and that's probably too much in this market.

''We got minimal flooding, we got seven inches. That is bad enough because it was brackish salt-sewage water,'' she said.

Of her hope to sell, she said, ``It just has not gone like we hoped it would.''

One cause of the inventory glut: A number of native ''Conchs'' are scrambling to forgo paradise as fast as they can, unloading flooded homes onto the market in hopes of selling out while also pocketing insurance or FEMA checks.

And another hurricane season is just around the corner.

'I have a lot of friends who've said, `By the first of June, I'm going to be outta here,' '' Nicklaus said.

The slowdown, which has had less impact on ultra-high-end properties, also seems to have scotched a local stampede to real estate licensing classes.

''Everybody who was in the fire department or a bartender got a real estate license,'' said real estate agent John Loulan of Realty Executives.

``It was like the dotcom days, and people were just out there paying whatever just to have the property.''

The average sale price in and around Key West actually rose by about 6 percent in January compared to last year, a reflection of top-shelf properties that are still closing.

But the days of the $650,000 one-bedroom cottage seem to be over -- for now -- while massive price drops reminiscent of a fire sale have become more common.

A flooded home that real estate agent Jeff Searcy put on the market last year for $895,000 recently sold for $400,000 less.

''They did not want to deal with the mold issue and ripping everything up,'' he said of the old owners.

``They wanted out from under it and were willing to take a bath on it.''