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An Information Guide to Duck Key in the Florida Keys

























Real Estate News September/2007





If you owned a home or purchased a home on Duck Key between 1998 and 2005 the value of that property appreciated tremendously. Below is a screen shot of a New York Times chart showing the change nationally in existing home values during the past 116 years. The real estate boom began in 1997 and continued on into 2005. Factoring in inflation, the index of housing value increased by 83% since 1997.

To view a readable image of the chart above go to NYTIMES August 26 2006

Real home prices (home prices adjusted for inflation) generally remained flat from 1890 to 1995. World Wars and The Depression explain the ups and downs, but from the standpoint of value, ownership of a home was not that great of an investment over the long term.



Since 2006 the real estate market has experienced declines in annual home price increases. In fact the trend line has dropped into the negative range as of late which means that for some investors who bought during the last several years the current value of that property is worth less than what they paid for it.

If you bought before that chances are good that the present decline will not wipe out previous home equity gains

Home buyers are aware of the trend and are cautious in making purchases. Speculators and home flippers are no longer in the market. As a result sales numbers are returning to percentages experienced prior to the real estate value explosion.


While not in the mainstream, writer John Talbott in his book, Sell Now! The End of the Housing Bubble writes that market pricing on real estate has to be wrong during the last decade. He believes the housing bubble was caused primarily by the easing of lending standards and the setting of low adjustable interest rate mortgages.

Providing charts like the one above Talbott argues that 2006 home prices are grossly overvalued and predicts that housing prices will plummet by as much as 50 percent over the next five to seven years.


Talbott wrote Sell Now! The End of the Housing Bubble in early 2006. In 2003 he wrote The Coming Crash in the Housing Market. At the time many experts expressed their doughts about a housing bubble. Now we are experiencing a nationwide decline in the market evidenced by the median price of a home dipping for the first time since federal housing agencies began keeping statistics in 1950.



Home sales in the Middle Keys were down 35% when comparing first six months of years 2006 and 2007.

On Duck Key as of August 15, 2007 there were 42 homes on the residential islands of Duck Key for sale. This represent approximately 10 percent of the residential housing inventory on Duck Key. Most of properties for sale were MLS listed, but a number fell into the FIBO, for sale by owner category. Prices on all but ten of the homes remained unchanged. Significant reductions in the asking price were noticed in four homes for sale. One property was reduced by $800,000, another by $600,000, with two others by $445,000 and $400,000. In September an inland home at 147 Indies Drive was advertised to be sold at auction on site on September 20, 2007 by Williams and Williams.

The Coldwell Banker Schmitt Real Estate newsletter for Summer 2007 reports that Keys-wide, the sale price of homes has dropped 6% in comparing the first half of 2006 vs. 2007. Also their statistics show that "properties priced appropriately at the time of coming on the market" sold more quickly. According to Coldwell Banker Schmitt such "correctly priced" properties were on average on the market 51 days in the Lower Keys and 95 days in the Middle Keys. "Educated and informed buyers are out
there and quickly recognize properties that are priced right."

Coldwell Banker Schmitt Real Estate believes that properties priced too high in the beginning, require price reductions before attracting buyers. For the Middle Keys, such properties were on the market 249 days prior to contract. According to Coldwell Banker Schmitt "sellers must price their property aggressively at the time of listing, or it will languish on the market and sell for less in the months ahead than at the time of listing.


INDIES ISLAND - Hawk's Cay Village plus Condos

Villa properties at Hawk's Cay Village have shown a marked decline in their asking price. Recent activity seems to indicate villas priced in the upper $400,000s to low $500,000s are starting to move. A count of the MLS internet Listing done in August 2007 showed Indies Island 53 units for sale (about 18% of Indies Island properties). This number is a total of all properties for sale at Hawk's Cay Village, the Santuary, the Marina Condo , and Indies Condo. Of the 53 units about a dozen are new to the list. An equal number of units that were listed for sale in April of 2007 have been withdrawn from the market.

Of the 53 Indies Island properties listed for sale in August 2007 about half have a lower asking price than what they started with. Twenty-four properties have had their list price reduced by $100,000 or more. Four of these properties saw a reduction of more than $200,000 from their initial asking price, three were reduced by $300,000 or more and still another was reduced by $430,000.



Duck Key - There were several bank foreclosures and short sales on Duck Key in 2006 and 2007.

Key West and Florida Keys - Foreclosure filings recorded in 2007 with the Monroe County Clerk of the Courts show an increase which will break all previous records. The Key West Chronicle website searched past County records and tabulated "the number of defendants in foreclosure filings" year by year going back to 1989. They cautioned that the statistics "show the number of defendants in these cases, and therefore overstate the number of actual properties since many properties have multiple owners/defendants. Also, many of the foreclosure filings are for timeshares . . . " " Still, this is a useful view of the condition of the real estate market in the Florida Keys.







FORECLOSURE "defendants





FORECLOSURES "defendants"





* as of July 2007,
** approximation rounded downward to nearest 10

The statistics for the number of defendants in foreclosure filings show a likely increase of 100% by the end of 2007 over that of 2006. This is remarkable. For the years 1999 through 2003 the average number of foreclosure defendants for Key West was 460. The average number for the entire County was 991.



Rising foreclosures will very likely increase the inventory of unsold homes. While individual homeowners not facing foreclosure may take their homes off the market to await better prices, it is unlikely that banks and speculators will be delisting properties. In the Florida Keys as of July 2007 there were 4559 homes for sale. At the current sales pace that represents over 36 months of inventory.

Nationally the inventory of all unsold homes, single family and condo, rose to a record 4.59 million. At the current sales pace this represent a 9.2 month's supply of homes in the United States. Buyers do not believe the market has bottomed out as yet, and with the current credit crunch and with the increasing inventory of homes for sale there is little to expect the 2008 real estate market will be better than 2007.

The tightening of credit standards together with increasing inventories, higher interest rates, and foreclosures has resulted in declining home prices. Moreover because the decline in home values has shown little sign of slowing down many potential buyers feel that now is not the time to buy. Many "experts" are predicting further declines and conselling buyers not to purchase a home in a declining equity market.

July data shows inventories of unsold homes at a 16-year high. Realtors attribute the high inventory of homes to sellers' unwillingness to reduce prices to an appropriate level. Sellers are reluctant to cut prices and, buyers wait for better bargains.


Key West Chronicle places the blame for the demise of the real estate market on lenders, developers, realtors, and flippers. For a list of the "developers" who have over built go to Key West Chronicle.


Florida - The Miami Herald this July reported that Florida ranks second after California among states with homes in foreclosure. In the first six months of 2007 one of every 81 Florida homes were sent foreclosure notices. That is an increase of seventy-seven percent over the first six months of 2006. In the first six months foreclosures have tripled in Miami-Dade County and Broward County.


What can happen if a bank forecloses and sells a property at auction at the County courthouse for less than what you owe? Since the sale of the house doesn't cover the mortgage owed, the difference is owed to the lender. The lender can get a judgment against the borrower, take their assets and attach a paycheck against this "unsecured" portion of debt. If for some reason the bank forgives the money owed, the bank writes the loss off against income and files a 1099 with the borrower's name and the amount of loss with the IRS.

The IRS sees this as money as income and as far as they are concerned the borrower owe taxes on it. They can get a judgment against the borrower, take their assets and attach their paycheck. If the borrower doesn't own anything and can prove they are insolvent the IRS will not ask them to pay taxes.



The housing market that was on fire between 2001 and 2005 has turned south. The trend of fewer property sales together with an increase in inventory of properties for sale continues.

Sellers appear to be reducing pricing on their properties (note the average sale price as of the second quarter of 2007). Home prices had escalated to such a degree that many buyers were priced out of the market. In order to sell their home, owners have dropped their asking price. Check Indies Island prices for Hawk's Cay Villas.


The chart below shows the inventory of homes for sale dropping slightly when compared to 2006.

  end of 2002 end of 2003 end of 2004 end of 2005 end of 2006   As of second quarter 2007
Number of Sales 3089 3390 3510 2752


Aver. Sale Price 323K 433K 563K 782K


Number for Sale 1822 1810 1818 3469 4,629   4559


FLORIDA KEYS: Source Schmitt Coldwell Banker Real Estate and MLS

The Real Estate Newsletter, Tropical Breezes, for Summer 2007 is available online and its contents can be very helpful to those thinking about buying or selling a house in the Florida Keys.

Some of the positive factors mentioned in the Spring 2007 Newsletter of Tropical Breezes (factors some of which are national in scope and others, endemic to The Keys) do not seem to be bearing out.

It remains true that "The Florida Keys continues to be one of the most unique places to live in the U.S., and . . ., one with unrealized value from many perspectives. Because of our significant growth and development restrictions there is little opportunity to create more product, so what we have today in number of units is essentially all there ever will be, a finite resource in the face of increasing demand."

Also "The nation continues to experience a healthy and growing economy . . . . Also helpful is the fact that insurance rates have been mitigated."

But as of August 2007

1. There is no evidence to suggest that the Keys' real estate market has hit bottom. Most expert predict further declines in sale prices. Mark Zandi, chief economist at Moody’s predicts that average house prices nationwide will fall 10 percent from their peak in late 2005 to their trough in the middle of 2008. The National Association of Realtors foresees the worst annual price decline in four decades of recordkeeping. Nationally existing homes sales are sluggish and sales have fallen to the lowest point in four years. The National Association of Realtors is forecasting sales declines throughout 2007.

2. Sales have not increased and the months of inventory for the Middle Keys is currently 43 months. Even with the growth and development restrictions of the Keys it will take many months to reduce the current inventory.

3. Interest rates are starting to rise especially so for non-conforming mortgages. Many mortgages for second homes or vacation homes in the Florida Keys fall into the jumbo rate category (those over $417,000). The current mortgage credit situation is raising interest rates that home buyers are quoted, and is causing changes in such criteria as minimum credit scores. Jumbo rates have climbed 0.50 to 1.25 percentage points above rates for conforming mortgages. New credit restrictions and increases in rate quotes for jumbo mortgages could have a considerable impact on future home purchases in the Florida Keys, and put financing out of reach for some borrowers. Lenders are requiring minimum equity stakes of the buyers. The chart above indicates the average sale price for a home in the Florida Keys is about $750,000. In order to avoid the rates of a jumbo mortgage a buyer would have to put down $333,000. Home sellers could find it more difficult to find qualified buyers.

4. Mortgage lenders have begun insisting that the ''comparables'' for appraisals associated with loan requests be for properties sold within the last three to six months only, and lenders want detailed information on asking prices of similar houses currently for sale.

5. Foreclosers - In the spring of 2007, nationally, a significant number of homeowners stopped paying on their mortgage, and mortgage bonds starting losing value. Bankers are now fairly certain that over 2 million subprime loans will end in foreclosure in the coming years. These adjustable mortgages have a reset date and when adjusted upward from the low initial rate to the current rate will end in foreclosure. Hundreds of billions in mortgage securities and bonds that were thought to be worth more or less the price they were sold at, are now deemed worthless.

The resetting of mortgages will peak in October of 2007, when more than $50 billion in mortgages will reset to a new rate. The New York Times reported, "The level will remain above $30 billion a month through September 2008." Between this year and 2008, $1 trillion worth of mortgages will reset.

The cost of resetting mortgage rates, one expert predicts that seven million people could lose their homes through foreclosures

The effect such foreclosures will have on the housing market will be far from positive, and the surge in foreclosures will cause a decrease in home prices.

Florida along with California, Nevada, and Michigan are expected to get hit the hardest.

6. While Florida's population increase continues, the census shows that Monroe County is experiencing a decline in population. The movement of affluent Baby Boomers from the north to the Keys so far has not kept pace with the population exodus.

In July of 2006, Monroe County had a population of 74,737 according the Census Bureau. That figure represented a decline of 6 percent since the year 2000. During that same period Florida's total population has increased by 18 percent. Officials believe the population decline is due to uncertainty about hurricanes, increased insurance costs, and the increase in housing costs.

7. Second homes represent a large segment (about 24 percent) of the Florida Keys' housing market. Second homes are not covered by the homestead exemption and do not receive the cap on tax assessment increases available only to permanent residents. High taxes on second homes and properties such as the villas at Hawk's Cay and Tranquility Bay have handicapped sales in the Keys which compete with less expensive second-home markets outside of Florida.

8. PRESS RELEASE - S&P/Case-Shiller® Home Price Indices - ANNUAL GROWTH RATE

New York, July 31, 2007 – Data through May 2007, released today by Standard & Poor’s for its S&P/Case-Shiller® Home Price Indices, the leading measure of U.S. home prices, shows the annual growth rate in prices of existing single family homes across the United States continue their decline, marking their 18th consecutive decline in the growth rate, beginning in December 2005.

“At a national level, declines in annual home price returns are showing no signs of a slowdown or turnaround,” says Robert J. Shiller, Chief Economist at MacroMarkets LLC. “Year-over-year price returns are continuing to either move deeper into negative territory or experience persistent diminishing returns. If there is any positive news in these numbers, it may be that in both May and April eight of the 20 markets showed positive monthly growth rates. This compares to only one or two of the 20 in the late winter and early spring. We need a few more months of data, however, to determine if this is the beginning of a national turnaround, since the national trend is still at a sharp deceleration.”

The Standard & Poor's/Case-Schiller quarterly index, found that U.S. home prices fell 3.2 percent in the second quarter, the steepest rate of decline since S&P began its nationwide housing index in 1987.

The steep decline from the peak of 2005 on the Standard & Poor's/Case-Schiller quarterly index is staggering. The current high inventory level for unsold homes in the Florida Keys together with the present sales rate, suggests a continuing decline in prices for the near future.

It is possible a turnaround won't take place until 2009. One expert, Ted Jones, senior vice president and chief economist with Houston-based Stewart Title Guaranty Co., one of the nation's largest title companies, told realtors in attendance at the Annual Convention of Florida Association of Realtors held this August 2007 not to count on a sales turnaround in the Sunshine State for at least 18 months.

9. A chart of the historical year-over-year monthly percent change in the actual home-price figures for the Miami. The chart paints a pretty good picture of the severity of the declines in home price appreciation.The chart below represents price figures as of March 2007.

The chart above shows data through May 2007 for the nation. Note the trend line drops into negative territory.









Below are a number of links to the Schmitt Coldwell Banker Real Estate Newsletter. The newsletters are the most definitive source of real estate news and trends available on Florida Keys and Key West real estate.

2007 - Spring - Summer

2006 - Spring - Summer - Fall - Winter

2005 - Spring - Summer - Fall - Winter

2004 - Spring - Summer - Fall - Winter

2003 - Spring - Summer - Fall - Winter

2002 - Spring - Fall - Winter

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