At this moment, we've got rows of new and used empty houses, town homes, and condos all throughout the Keys where the lights and water have never been turned on or where the once lived in unit hasn't seen a living soul in months. (The condo unit next to my rental has never seen a human being for the past 13 months and it is in foreclosure. This next door condo, for whatever reason, is not currently listed on the Key West MLS.)
Out here on the north end of Key West, there are dozens of brand new condos built in 2005 which have never been sold. I've driven by these "ghost" condos nightly and wondered who in the world is going to buy one of them at 2005 prices? After all, the high end of the market is only beginning to fall now.
If these expensive homes did not move for the past four years, who in their right mind would buy one now just as Prime and Jumbo borrowers have begun to default on their loans at faster rates than the sub-Prime borrowers? As more Prime and Jumbo borrowers default on their old homes, the pool of prospective buyers of such expensive homes as this town home grows smaller.
More so, what bank is going to lend anyone money on one of these unless they have the full $220,000 down payment? Lending has changed drastically and you won't see cab drivers being able to buy (I know a cab driver in Key West who bought two of the smaller Seaside condos by using Option ARMs. He's now trying to short sale one of them) these type of townhomes on less than $100,000 a year family income any longer.
Thus, it is no surprise to see the following "reduction in price" entry . . . finally . . . on the MLS a week ago:
Luxury three level town home with ocean views in a gated community. The home features 2 master suites, 3 full baths, large rooms, vaulted ceilings, two car garage, private rear yard, elevator and hurricane/wind resistant doors and windows. Upgraded finishes include tile floors, granite countertops in the kitchen and baths, stainless steel appliances and security system. There is a rooftop observation deck with spectacular water and island views. The home is being sold furnished and the community includes pool and clubhouse.
Listing Date:6/7/2007
Original Price:$1,200,000
Listing Price: $1,100,000 (Price Change on June 26,2009)
Property Type: Townhouse
On Market: 758 Days
Mile Marker: 4
Building Style: Townhouse,Three Story
Bedrooms: 2
Bathrooms: 3.0
Price Per Sq. Ft. $603.07
Square Footage: 1,824
Lot Sq Footage: 1,702
Year Built: 2005
Taxes $7,029.00
Tax Year: 2008
Exemptions: None
Ouch. Check out those taxes.
Please note that this is the only one of these 3 story town homes currently listed on the MLS. That means all the other ones still sit on the developer's inventory where they (the developers) are waiting to drib and drab these empty town homes onto the MLS one at a time, hoping that the slow approach will artificially keep these homes high prices propped up.
The problem with this developer's method of stemming potential home price drops is this: the pool of investors who can afford this type of place at the new listing price of $1,100,000 (woo-woo, you save $100,000 off 2005 prices) is quickly shrinking like a puddle on hot asphalt.
The fact that this home was marketed at $1,200,000 for over 750 days with no price change tells us this developer has been in denial for much too long and is now beginning to realize . . . much too late . . . that this market ain't coming back any time soon.
Indeed, all one must do is follow the burgeoning price reductions on expensive homes in Key West (as I do with my own Excel spreadsheet) to see the trend to the downside is strong and picking up steam.
More about this later, but just keep in mind the "low" inventory which Realtors keep harping upon as a good sign that Real Estate is bottoming in the Keys: Realtors are neglecting all the defaults and pre-foreclosures in the pipeline (where seventeen $1 million and higher homes are now in default in Key West), plus the inventory as shown on the MLS is not showing all the empty homes such as these townhomes in Seaside Court.
Watch the prices on expensive properties fall, folks. When the upper end crashes, it will put even more pressure on people with tiny cottages, condos and townhomes who are still living in la-la land and asking $350,000 upwards for places which sold for $90,000 less than a few years ago.
Keep the powder dry (cash) and don't buy 'til the next leg of the crash begins in earnest with the Prime and Jumbo borrowers beginning to default in numbers that will make the sub-Prime crash look like peanuts.
Whereas today there is usually one or two deals where the house is at 1995 prices, sometime in 2011-2015 there will be dozens of these bargains.
As always, caveat emptor,
Rock
p.s. I just checked Realty Trac, and three of the smaller 2 Br/2 Ba town homes in Seaside Court North (these are on the backside with no direct view of what used to be Houseboat Row and most of them border the street into Las Salinas/Ocean Walk) and two of the 2 Br/2 Ba town homes in Seaside Court South are now in some stage of foreclosure. None of these five are currently on the MLS as possible short sales or REOs, eventhough some of them have been in some stage of foreclosure for more than 6 months. That's five homes where the current owners are in such arrears they haven't made a mortgage payment for at least 2 months and some have not paid in over 6 months.
Just for the record, the condo (2 Br, 2 Ba) I live in has had three price drops in 30 days by my landlord who is trying to negoatiate a short sale with his primary lender. He and I just had a chat as I was writing this blog post. I told him there are two units in this same building offering one more bedroom than this condo he's trying to short sell and they are $25,000 cheaper in their listing prices. Lastly, my landlord just shaved another $100 off my rent.
Rents in this building keep dropping as more of the units slip into foreclosure.
