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An Information Guide to Duck Key in the Florida Keys
























 January 29, 2005


Yale University economist Robert Shiller, who foretold the March 2000 bursting of the stock market bubble in his book "Irrational Exuberance, says "This is the biggest real estate bubble we've ever seen," He expects widespread declines in home values, . . . "


 Is the real estate market in the Florida Keys overheated?

Currently Forida Keys home prices are increasing at a rate of 2 to 3 percent each month, while many cities throughout the United States have shown less than a 4% yearly appreciation in home prices during the last five years.


An article in The Wall Street Journal of January 18, 2005 entilted "Who Suffers Most in Bubble?" reports that "Housing prices, adjusted for inflation, are up 36% since 1995, the steepest boom in at least 50 years according to Dean Baker, co-director of the Center for Economic and Policy Research in Washington." Dean Baker predicts the "bubble . . . will be ending soon." The same article says most Fed officials discount the notion of a bubble.

Will home prices in hot real estate markets such as the Florida Keys plummet? Is there a real estate bubble? A number of economists believe that the good times may be over soon. Others pundants caution that we face an inflationary depression and the safest thing people can do is to put their wealth into a hard asset such as real estate?

On Duck Key a home that sold for over $700,000 14 months ago, recently sold for around $1,300,000. The least expensive home on the water is now listed at $1,240,000. A newly constructed home on the canal is listed at $2.4 million. Another home that sold for over $1.3 million not that long ago is now listed for sale at over $2.2 million. A house in Islamorada which sold for $525,000 12 months ago resold for $850,000.


2001 - $285,840

2002 - $323,000

2003 - $424,000

2004 - $557,000


Florida Keys KeyNoter

The KeyNoter on January 19, 2005 reported that the average cost of a home in the Florida Keys was approaching $600,000. Prices have "skyrocketed at nose-bleed rates" and "the average sale price . . . shows no sign of flagging." The KeyNoter writes of a realtor in Key Largo who explained that ". . . people in the Keys expect these kinds of increases for the next four or five years, unless interest rates rise dramatically." Also of note in the article were statistics which showed that the number of properties sold during the 4th quarter of 2004 decreased by 11 percent in contrast to the same quarter in 2003. Sales also dropped 7.66 percent when comparing the third quater of 2003 and that of 2004.


"Is the boom over?"

On residential Duck Keys of this date there are 17 homes for sale.This represents less than 5 percent of the housing population on Duck Key. On commercially zoned Duck Key there are 31 Hawk's Cay Village villas for sale. That's slightly more than 10 percent of the Pritam Singh villas. Hurricane season may account for this buildup in inventory. Sales during the months of February, March and April will be a telling sign of the future.  


Special Advertising Supplement identified as "Keys Living" Winter 2005

In a Special Advertising Supplement identified as "Keys Living" Winter 2005 which was part of the January 29, 2005 KeyNoter the reader is provided with a great deal of information. Some highlights are

1. Most home buyers are purchasing vacation homes. High-end homes especially are being purchased by non-state residents as second, third and fourth homes. Gino DeSanctis of D'Asign Source is reported as indicating all his properties as being purchased as vacation homes.

2. The average price of homes in the final quarter of 2004 rose about 26% when compared to 2003 prices.

3. Prices have not slackened or leveled off

4. The available housing inventory for the Florida Keys and Key West went down by 1 percent for the data period.


Brian Schmitt of Coldwell Banker in Marathon is quoted in theSpecial Advertising Supplement, "The first thing [if demand was leveling off] you'd see is inventory creep up and we just haven't seen that." The market is moving at 2 to 3 percent price increases a month."

Another realtor, Cherl Moses from Summerland Key doesn't believe that we're experiencing a bubble. She's quoted, " As long as there is the kind of demand we're seeing, we're going to continue to see prices escalate.

The Special Advertising section reports agents from Coldwell Banker Schmitt and Century 21 Keysearch as indicating that prices should keep at their all time high because of fewer properties listed for sale than in previous years and greater demand from worldwide buyers for property in the Florida Keys. Also it seems that folks with homes in other parts of Florida affected by the hurricane are "exchanging for homes in the Keys.

Another agent, Charoltte Porter of Coldwell Banker Schmitt in Marathon, does not see much chance that that property prices will decline this year. She's quoted, "Too many factors would have to combine for any negative effect on the market." What would cause a decline? " . . . a bad February [ real estate sales], a creep upwards in the interest rate, and a drop in in economic factors."


Hot Spots

Many cities throughout the United States have shown less than a 4% yearly appreciation in home price during the last five years, while places like Orange County in California and the Florida Keys have shown increases of 150 to 180 per cent during that period. Are the Keys experiencing a real estate bubble or is the price appreciation a product of ROGO, the rate of growth regulations and a limited supply of housing in the area?


Tropical Breezes Real Estate Newsletters

A great deal of information may be found in the Tropical Breezes Real Estate Newsletters for the Florida Keys by Coldwell Banker Schmitt.

The Winter 2004/2005 newsletter which compared the nine month period of January through September of 2004 with the nine month averages of 2003 indicates that properties sold more quickly (average days to sell dropped 13%), average sales prices increased (32% - $557,000 versus $424,000), and the inventory of available homes declined by 1%. In the middle keys the inventory climbed by 9%.

Realtors in the Keys see "strong buyer demand for a limited inventory of properties...."





1. Washington Monthly

"Whether or to what extent American home prices will plummet soon is open to some debate, but not much."

" . . . , the market is badly bloated. One index of housing inflation is the difference between house prices and rents. In a healthy market, driven by demand, rents and sale prices ought to track roughly together. But while sale prices have soared, rents have stayed flat; and in some of the most overheated markets, like San Francisco and Seattle, they have actually been declining.

Such a gap, the economist and New York Times columnist Paul Krugman has written, suggests "that people are now buying houses for speculation rather than merely for shelter," evidence that he called a "compelling case" for a housing bubble. "Within the next year or so," The Economist argued in a May 2003 editorial, these regional "bubbles are likely to burst, leading to falls in average real home prices of 15-20 percent" across America. And, of course, in the most heated markets the drop is likely to be steeper yet.

 2. Kiplinger


"No Bubble Trouble"

"One good thing you can say about the pundits who keep predicting that the end is near for rising home prices: They're consistent. They've been dead wrong year after year.

"Despite their near certainty that the market would cool in 2004, median U.S. home prices rose 9%, and a vast majority of cities saw a bigger increase than in 2003.

"Despite what you might think about soaring prices in your neighborhood -- or the neighborhood you'd like to live in -- investment strategist Ed Yardeni of Oak Associates says home prices aren't outrageous given the low interest rates. "You'd find out if this is a bubble if mortgage rates rose two, three or four percentage points." He predicts that would result in a loud pop, followed by falling prices. But Yardeni doesn't foresee such a hike in rates, and expects single-digit percentage increases in prices for the next three or four years. "


3. Christian Science Monitor

"The real-estate industry is going to be one of the worst industries to be associated with in the next 10 to 20 years. We are in a major bubble."


4. Ignore Warnings of a Real Estate Bubble

Charles Stampul, Monday, Jan. 17, 2005

Viewers of CNBC and other business programs are increasingly hearing that the national real estate market may be cresting. Real estate is on a run comparable to the run of stocks in the mid to late 1990s, but for very different reasons.


4. MONEY Magazine (link now dead)

"If you live in a hot real estate market and you're buying or selling a home, or just perusing the Sunday classifieds and quickly tallying your growing net worth, you have to wonder: Can real estate keep going, or is this Nasdaq 5000 all over again? Our forecast: It'll keep going, albeit at a tempered pace.

"Don't bet on further 20 percent gains in 2005. But don't bet on a collapse either. If price declines do occur, they may well happen where you'd least expect.

Even the housing bulls are no longer raging. The perennially optimistic National Association of Realtors predicts 5 percent gains on average this year. "

"Among the bears, count Yale University economist Robert Shiller, who foretold the March 2000 bursting of the stock market bubble in his book "Irrational Exuberance." "This is the biggest real estate bubble we've ever seen," says Shiller. He expects widespread declines in home values, . . . "


5.  Debating the Bubble - has a message board discussion that asks the question, "How has the housing bubble affected your plans to buy or sell a home?" The board has more than 6,000 postings from consumers debating both sides of the bubble argument.



Economists Forecast the Outlook for the Real Estate Market in 2005 and Beyond













 * - Source -Tropical Breezes Newsletters

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