REnewsFEB16 - Varsity Realtor

Florida Keys Real Estate Company
1824 Flagler Ave
Key West, FL 33040
Phone: 305-296-4422
Cell Phone: 305-304-2433
FAX: 305-296-4462
[email protected]
1 February 2016
Hello, everyone …
Not winning PowerBall, I must keep my nose to the grindstone and produce the FEB newsletter. Here it is J
What I really want is to speak to the PowerBall winners and explain the benefits of a Key West SteamPlant
luxury condo! And Sunset Key is pretty cool, too.
Table of Contents for this issue:
· Cover letter
· Article: Housing Markets with the Most CASH Buyers (Zillow.com)
· Article: Key Haven sales history (from local MLS data)
· Island 106.9 Radio “Keys Real Estate Show”: January 2016 show summaries
· My current buyers: January 2016
· Article: Multi-Generational Households on the Rise (JBREC)
· Article: The Big Short (WSJ Market Watch)
· Southernmost Stars: 1 February 2016
The stock markets sure have been wild! And last month I had an article about the FED raising interest rates,
and what does that mean to you? The article smugly predicted that mortgage loan rates “will rise gradually”.
Well, ha! They have gone down. If you thought The Big Short was complicated, the world of interest rates is a
close second. Nothing is easy these days.
In other world news:
(1) College football dynasty. Roll Tide!
(2) I saw the new Star Wars movie. Spoiler alert: Han Solo is, um, deceased. At least, I think so. But the
Millennium Falcon still rocks!
(3) Fast facts from Key West MLS about 2015:
a. Old Town single-family homes:
#Sales = 153 Avg $ = $896,135
Avg $/sqft = 621
Avg sqft = 1485 Avg days-on-market = 230
b. Rest of KW single-family homes: #Sales = 172 Avg $ = $675,547
Avg $/sqft = 401
Avg sqft = 1659 Avg days-on-market = 168
c. All KW condos/townhomes:
#Sales = 236 Avg $ = $489,808
Avg $/sqft = 457
Avg sqft = 1117 Avg days-on-market = 119
d. So …Old Town properties are smaller, much more expensive and take longer to sell. They are
historic. They look like post-cards. They are likely to be in the flood X-zone. Hemingway
probably drank there. And wrote something. They have gingerbread fanci-work thingies. Great
restaurants, churches, too, and no gas stations. You really ought to own one.
Jim Smith, Broker Associate, part-owner
Florida Keys Real Estate Company
1824 Flagler Ave, Key West, FL 33040
Cell: 305-304-2433
FAX: 305-296-4462 [email protected]
by Emily Heffter
18 January 2016
Housing markets with the most CASH buyers
During the great recession, cash buyers helped revive housing markets by keeping sales alive when mortgages
were hard to come by. Today, cash deals are still common, according to Zillow’s latest analysis of cash sales.
Here are the housing markets with the largest percentage of cash buyers:
1. Miami, FL: 55% of sales there in Qtr2 of 2015 were made with all cash. Foreign buyers are common in
Miami, and they are often looking for a safe place to invest their cash.
2. Sarasota, FL: In Sarasota, 53.4% of all sales were made with all cash in Qtr2 of 2015.
3. Fort Myers, FL: Nearly three-quarters of all sales were made with cash in this Gulf Coast market as
recently as 2011. Now it comes in third place at 51.8%.
4. Daytona Beach, FL: The percentage of deals made with all cash dipped in 2015 to just under 50%.
5. Tampa, FL: Cash sales are still common in Tampa, but they’ve dropped below half, to 47.8%.
6. Cleveland, OH: Cleveland was hit hard in the recession, and investors noticed. In 2013, nearly 60% of all
sales were all-cash. That has dropped to 45.2%.
7. Lakeland, FL: The Lakeland market is still attractive to cash buyers, with 44.7% of all sales being cash.
8. Detroit, MI: Detroit is a famously depressed market that has made some strides in recent years, but cash
buyers still make up 44.6% of all transactions. That’s down from 73.7% at its cash-sales peak.
9. Melbourne, FL: Nearly 44% of buyers in Melbourne bring all cash.
10. Orlando, FL: In Orlando, home buyers bring cash 43.8% of the time.
JSmith Note: Florida is well-represented, with 8-out-of-10!! I’ve wondered for several years now … why are so
many homeowners buying with cash? There are two good reasons why they should not pay cash:
(1) Interest rates are historically low … why not lock-in a low rate now for the rest of your life?
(2) Inflation is coming, or so many believe. So, borrow money now and pay it back with less valuable dollars.
And if inflation does come, don’t you want to be in real estate? With leverage?
It used to be that 10% of sales were cash. Now it’s about 50%. What happened?? Here’s what I think:
(1) If you believe TSA is a hassle at the airport, have you tried to get a mortgage loan in the last 7-8 years?
(2) Have you dealt with Flood and Windstorm insurance in Florida? If you have a mortgage loan, you have.
Buying with cash means not dealing with banks and not dealing with insurance. Simple as that. My opinion. If I
had won a thin slice of PowerBall … goodbye to those crooks institutions!
Additional note about cash purchases: Federal government is concerned about money-laundering. Where is the
cash coming from? Someone will be responsible in the not-too-distant-future for finding out! More regulations.
Lower Keys Real Estate Data:
Just the facts, M’aam ©
MLS stats on Key Haven, about 450 single-family, mostly-waterfront homes at mile-marker #5.
Key Haven sales history (last 18 years):
Year:
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
# Residences Sold:
10
14
16
19
17
23
22
20
10
21
5
17
11
10
14
19
14
30
Avg Sell Price:
$ 349,300
$ 441,700
$ 458,000
$ 549,700
$ 616,600
$ 688,700
$ 1,009,455
$ 1,429,437
$ 1,028,150
$ 997,207
$ 656,980
$ 578,629
$ 616,727
$ 827,400
$ 644,421
$ 927,820
$ 822,296
$ 772,453
Avg $/sqft:
$ 179/sqft
$ 203/sqft
$ 208/sqft
$ 260/sqft
$ 298/sqft
$ 338/sqft
$ 469/sqft
$ 660/sqft
$ 556/sqft
$ 466/sqft
$ 371/sqft
$ 277/sqft
$ 311/sqft
$ 350/sqft
$ 322/sqft
$ 390/sqft
$ 359/sqft
$ 377/sqft
There is no end to the number of different ways to slice the data. Things to note:
(1) 30 sales is the Bob Beamon of Olympic records … 7 more home sales than best year ever in last 18!
(2) A disproportionate number of home sales, 13 out of 30, occurred in the A and B Sections … the firstbuilt (oldest) and smallest homes in the development. This may account for the average sale price to be
the 2nd straight year of declines.
(3) But the average $-per-Sqft was up! Go figure.
So much for sales … what’s on-the-market in Key Haven right now?
(1) 11 homes, which seems low for the start of the “season”.
(2) Average asking price is $1,544,127 and $537/sqft … zowie!
(3) The range is: (a) from $617,400 for a 2-bed, 1-bath, 1176 sqft waterfront home in the front A Section.
(b) to $3,600,000 for a 5-bed, 3.5-bath, 4184 sqft open-water home on the last street.
(4) Average #Days-on-the-Market = 159.
If you would like to have the actual data, please send me an email … I’ll be happy to share it.
If you want the facts, you should be talking to FLORIDA KEYS REA ESTATE COMPANY. No BS.
Jim Smith, Broker Associate + part-owner
FLORIDA KEYS REAL ESTATE COMPANY
1824 Flagler Ave
Key West, FL 33040
Cell: 304-2433
[email protected]
Copyright 2016 by Jim Smith
All Rights Reserved
Island 106.9
WIIS
305-292-1069
www.island1069.com
The “Keys Real Estate Show” airs on Saturday mornings live at
10:00 AM from “Island 106.9” on FM radio. The station is located
at Duval Square. The show is hosted by:
Barbara Bowers, Berkshire Hathaway Home Services RE Co
Jim Smith, Florida Keys Real Estate Co
Ed Salazar, Bascom Grooms Real Estate
And here is what we did on-the-air in January 2016:
**************************************************************************************************
Saturday, 2 January 2016: My week off and what a week it was! Marilyn and I were in Temecula CA (SoCal wine
country) for our daughter’s wedding. Parents-of-the-Bride is a proud thing!! The radio show went on without me J
(1) “For Sale by Owner” sales come in lower than conventional sales … survey says!
(2) Over-valued is not the same thing as a “bubble” … so sayeth economists!
(3) Cuba’s real estate market has boomed recently … and brought with it free-market woes! Like, greed.
Saturday, 9 January 2016: Barbara, ED and I in the studio with me at the helm, driving the ship. Still not back on East
Coast time, however. But I’m remembering how much I like 79-degrees and sunny. That part came back fast.
(1) “The Big Short” … read the book, see the movie. Then read the book again. How did Wall Street do it?
(2) Lots of real estate statistics to discuss. Old Town homes … high number of sales, not so high average sale price.
(3) We had fun with the 27-things Floridians would know … where is Orlando, anyway?
Saturday, 16 January 2016: Barbara and I in the studio (and owner-Linda), me flying. Our guest this week was Giancarlo
Espinoza, a man of all trades … commercial lender, DJ, Realtor, photographer, techie, etc.
(1) Giancarlo talked about commercial lending through his Atlanta sponsor IOUFinancial. Fast. Accurate. Easy.
(2) Rating Agency shortcomings highlighted in The Big Short are still not fixed … so says recent SEC report.
(3) US Treasury Department wants the names of cash buyers, title companies are responsible.
Saturday, 23 January 2016: Same crew as last week in the studio! And we were smokin’ red hot … more good
information than the law allows for a 60-minute radio show.
(1) Key West multi-units … 30 of them currently on-the-market, duplex to 9-unit complex. Opportunities abound!
(2) 63% of over-55 buyers are opting to rent instead of buy. Shocker. We are not aware of that trend in Key West.
(3) Go to www.smartasset.com and click on “rent vs buy” … very comprehensive quantitative model! I like it J
Saturday, 30 January 2016: Ed and I were in the studio with our guest John North, mortgage lender at Keys Federal
Credit Union (KFCU). I was at the controls of American Airwaves flight #106.9 FM.
(1) What is a “credit union” anyway? It’s a different kind of duck bank … owned by its members (customers) for
their benefit, compared to commercial banks, which are owned by shareholders for their benefit. Ponder that.
(2) KFCU survived The Great Recession, one of only two financial institutions in the Keys who can claim that! And
it’s the oldest financial institution in the Keys (75 years old!). Basic banking … deposits come in at the best rates
and loans go out at the lowest rates. KFCU, a non-profit corporation, keeps the difference and gives it back to its
members and the community it serves.
(3) When shopping for a mortgage loan, remember KFCU … nothing “exotic”, just standard vanilla mortgage loans.
The world has enough risk, we don’t need our financial institutions adding more! Now, there’s a concept!
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My Current BUYERS in the Lower Florida Keys:
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February 2016
These are a sample of 5 buyers I am currently working with, in no particular order … what they are searching
for, what their concerns are, what issues must be overcome, etc. Some of this may resonate with you , too! It
will be a challenge to highlight 5 new buyers each month … but, let’s see how it goes. By my calculations, the
present inventory of buyers will be exhausted in a few short months, so I’ll need a steady pipeline of newbies to
replenish the inventory and keep this column going. Anyway, if you are a seller (or know someone who is),
maybe one of these buyers would be a good match! I hope you find this interesting, even with identities
withheld. If you are one of my buyer-prospects, surely you will recognize yourself!
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Buyer #1: A good friend who is a local General Contractor asked me to be on-the-lookout for a fixer-upper
project for himself. The Key West area is preferable, but elsewhere is not a dealbreaker. Good move, after all we have scoped-out several fixer-upper projects for
other buyers of mine … might as well partake personally. If you can add/expand
square-footage for about $300/sqft, and then have the finished product be worth
about $600/sqft, hmmm. Even better if you are a licensed GC. Double, hmmm.
There are no guarantees, of course, but still, hmmm. I can swing a hammer, but I
think that’s old fashioned. Need a degree in nail-gunning.
Buyer #2: We have a “lead generation” vendor who is contracted by the company. Whenever a sale results
from this vendor’s services, a portion of the Realtor’s commission is diverted to
pay for the service. The success rate is low (like 3%), but it’s business we might
not otherwise have. There’s a weird twist to this, however. If a customer is found
some other way, there’s strong temptation to tell that customer to NOT go to the
vendor’s system! That’s because if the client name shows up there, and there is a
closing, the commission is reduced. But OK, life is not fair. The system has
given me a buyer … waterfront, Big Pine Key, 2-beds, 2-baths, under $400K.
Buyer #3: A former Key West Sunrise Rotarian relocated to Atlanta nearly 10 years ago. He has reappeared!
He announced he is taking a position with Hilton Hotels and Resorts, and he’s
moving back to Key West. And he’s loving it! As for living arrangements, he
asked me to be on the lookout for a Key West duplex or triplex in a “fixer-upper”
condition, best bargain available. Fixer-uppers seem to be popular these days?!?
Without even looking, I know of several candidates, and I’m sure a careful MLS
search would scare up a few more. Another good “project” J
Buyer #4: I’m having a good month with the lead-generation vendor, mentioned earlier! A customer who is
currently overseas has contacted me with interest in a primary residence in Old
Town, close to Duval … strong preference for a condo or a townhome, and large
square-footage is important. After some research and back-and-forth emailing, it
appears that the pre-construction property on Simonton Street called “Old Town
Villas” is the most appropriate candidate. This buyer will be visiting Key West in
the next month. I will be prepared to show him the town! Love this job J
Buyer #5: A vacationer from Ohio stopped in the office for general information about real estate in the Keys.
He and his wife have visited the Keys for 40 years! Now, they may be interested
in dropping an anchor in the place where they love to vacation! They are not
ready to take action just yet … but the planning is beginning! The husband is
very fond of Key West, but the wife absolutely loves it J. So, he came in to
explore the possibilities and get the lay-of-the-land. Smart man! The Keys is a
very different animal from Ohio, so the idea may take some getting-used-to … but
the process is in motion.
By Isabell Kerins
January 2016
Multi-Generational Households on the Rise
14% of all US households (16.5 million!) now live multi-generationally, and the numbers continue to rise for
three primary reasons:
(1) Delaying marriage has increased the number of young adults living with their parents.
(2) Surging retirement has increased the number of retirees living with their children.
(3) Significant immigration from countries where multigenerational living is the norm has also helped boost
the numbers.
Most of the US housing stock was not built for multigenerational living … and this provides a tremendous
opportunity for home builders.
According to our Consumer Insights survey of more than 20,000 new home shoppers:
(1) 44% would like to accommodate their elderly parents in their next home.
(2) 42% plan on accommodating their 18+ older children in their next home.
(3) 65% of respondents desire a bedroom with bath on the ground level.
(4) 24% want a separate suite with a kitchenette and small living area.
Designs for these spaces fall into various floor plan configurations.
(1) Space for a 2nd adult generation can be designed as one large open "great room" with both a private entry
and direct access to the residence.
(2) Alternative layouts separate the living and sleeping environments, compartmentalizing spaces for
privacy.
(3) Another option is a beautifully designed, compact home, complete with private patio. Bedroom and
living areas are both made more livable by the presence of an integrated lounge space.
(4) China cabinet … a rarely seen feature that should be merchandised in every multi-generational suite for
elderly parents. Displaying one's cherished items is very important, especially to the elderly.
Family demographics and households are changing. Innovative builders, architects, and designers have
provided solutions for every product type to address this evolution in the new home.
JSmith Note: This article might resonate with new home builders, but that’s not the circumstance here in
the Lower Florida Keys. We are built-out, but there might be some application for multi-GEN homes:
(1) Multi-unit properties (duplex, triplex, and more) are generally investment properties for rental
income and appreciation. But some KW multi-units may be reconfigured for multi-GEN living.
And lately, the word on the street is that multi-units seem to be appraising low. Buying opportunity!
(2) There are properties in the lower Keys and Key West that have “extra ROGOs” which might be
taken advantage of. I know of one address where the owners bought the vacant lot next-door. At
one time, that lot held a dwelling unit … presto, an extra ROGO! Another address was a duplex and
was then converted to a large single-family home, which freed-up another extra ROGO. Those extra
ROGOs can be used to create separate, legal living space … without violating any of the multitudes
of City, County, or State building regulations. I think. But don’t quote me. I’m an amateur. But I
can put you in touch with an expert!
The Big Short
7 Jan 2016
The film version of “The Big Short” is entertaining and instructive. If you know the book by Michael Lewis,
it’s obvious that the film’s director and actors made Herculean efforts to explain the story’s difficult financial
concepts with humor and to portray the characters accurately.
One review of the film by a blogger and asset manager Cullen Roche complains that The Big Short pillories
Wall Street too much. If you wonder whether Wall Street deserves all the blame for the 2008 financial crisis,
read Bethany McLean’s and Joe Nocera’s “All the Devils are Here”. But, let’s concentrate on the critique that
the movie lauds investors who made an “active” bet (and a complicated one), and became rich from it.
The critique is right. The movie glorifies the active bet three hedge funds made against subprime mortgages.
But that doesn’t mean individual investors should now look for active managers to shepherd their assets. It just
means active managers can have important insights and can get bets right. In this case, spectacularly right.
The movie shows how Wall Street’s subprime machine helped distort the market by passing bad mortgages off
as solid investments. The credit-rating agencies played a huge part. Investors didn’t do their own due diligence,
and wanted to believe higher-yielding mortgages were safe. Eventually the banks themselves believed their own
lie, causing them to hold onto their toxic assets. There are many causes behind most market distortions, and
you’ll never think the market is efficient again after watching the movie.
Another lesson from The Big Short is that, in investing, it can help to have an odd personality. We’re social
creatures. We want to get along with each other. We want to make money when everyone else is making
money, and be invested where we think everyone else is invested. We’re so social that losing money is tolerable
when we know others are losing, too. Misery loves company. Few people really want to distinguish themselves
to the point of betting against the whole financial system.
It took a lot of intelligence for one of the movie’s heroes to read through subprime mortgage-bond prospectuses,
and it also took unusual emotional detachment to doubt the entire mortgage financing machine. This character
was diagnosed with Asperger’s Syndrome, making it difficult to respond to social cues. Mild autism doesn’t
make one a good investor, but it may give one certain psychological prerequisites for good investing. The story
has a Revenge-of-the-Nerds meets Gordon Gekko quality. Being a contrarian isn’t always right, of course.
Nobody ever said investing was easy.
JSmith Note: Full disclosure, yes, I thought the book and the movie were GREAT … but I’ve done a lot of reading on
the subject and may have an amateur’s understanding of the story. If you only see the movie without any context,
and are unfamiliar with the terminology, it may will be difficult to “get it”. Quick education:
Story: A few investors wanted to bet against the housing market, but there was no stock or bond for that.
Sub-prime: Risky. Lenders shudda known better, but they were getting huge pay-days, so what the heck.
Hedge fund: Think unregulated Mutual Fund. Think “cowboy”, not buttoned-down businessperson.
Short: How to make money when an investor believes a security is going to lose value.
CDO: Now it gets weird. CDO = Collateralized Debt Obligation. Thousands of mortgage loans are “bundled”
together into a bond-like security that appears to pay-off handsomely. Investors like that. Rating Agencies
gave them AAA scores, “investment grade”, the safest. “Quants” on Wall Street assembled the CDOs in
a way that statistically the risk was virtually eliminated. The perpetual money machine! I’m getting giddy.
CDS: Even weirder. CDS = Credit Default Swap. Insurance (not really). Just what the Hedge Funds wanted,
a way to bet against CDOs and their toxic innards. Turned-out to be a spectacular bet.
Rest of the story: A few contrarian investors (the cowboys) beat-the-pants off the Wall Street banks (the
suits) and made $billions. Downside? About 10 million homeowners lost their homes, and the CDO virus
spread globally, almost brining down entire countries. And no one seems to have been held responsible.
Southernmost Stars:
1 February 2016
The least expensive properties currently on the
market on the island of Key West. Changes from last 3 months are in blue!
Ten least expensive Condos or Townhomes in Key West:
Address:
Ask Price: #beds: #baths: Living Sqft: $/Sqft: Other:
3212 Northside #512
$173,900
1
1
528
329
Foreclosure
3212 Northside #614
$187,000
1
1
528
354
Conventional
1011 Varela #1
$245,000
1
1
300
817
Conventional
3212 Northside #608
$259,000
2
1
815
318
Conventional
1600 Bertha #2
$259,000
2
1
681
380
Conventional
3314 Northside #31
$269,000
2
2
920
292
Conventional
3930 S Roosevelt #208W $275,000
2
2
803
343
Conventional
3312 Northside #308
$279,000
2
1
631
442
Conventional
1500 Seminary #2D
$294,000
1
1
489
601
Conventional
3635 Seaside #202
$275,000
2
2
772
356
Conventional (affordable)
Missing from Aug 2015:
3312 Northside #516 … SOLD
3312 Northside #612 … under contract
828 Windsor #2 … cancelled 3314 Northside #47 … under contract 508 Louisa #1 … under contract
806 Florida #3 … contract
3930 S Roosevelt #214W … SOLD
1500 Seminary #6B … SOLD
Ten least expensive Single-Family Residences in Key West:
Address:
Ask Price: #beds: #baths: Living Sqft:
2119 Flagler Ave
$375,000
2
1
1030
1616 Bertha St
$379,000
2
1
752
3712 Duck Ave
$399,000
2
1
1274
3351 Donald Ave
$419,000
2
2
1248
3011 Riviera Dr
$429,000
3
1
1062
1200 6th St
$425,000
2
1
740
3323 Donald Ave
$440,000
3
2
1248
900 Thomas St
$449,000
2
1
700
321 Julia St
$450,000
1
1
585
1227 20th St
$469,000
3
1
964
Missing from Aug 2015: 1013 Packer St … under contract
3735 Duck Ave … under contract
$/Sqft:
Other:
364
Conventional
504
Conventional
313
Conventional
336
Conventional
404
Conventional
574
Conventional
353
Conventional
641
Conventional
769
Conventional
487
Conventional
3316 Harriett Ave … under contract
825 Southard (rear) … SOLD
LOTS of blue movers since 1 December 2015, especially condos/townhomes. And the replacement
properties are almost uniformly more expensive. My bold prediction from last quarter is not quite true yet,
but I’m betting it will be in May … that is the leading edge of the Bottom-10 will be:
Condo/TH = $300,000
Single-family Homes = $500,000.
Least expensive does not necessarily mean best value. That is determined subjectively by factoring-in other
variables like appreciation potential, amenities, special features, location, condition, age, style, appeal, etc.
Jim Smith, Broker Associate, part-owner
Florida Keys Real Estate Company
1824 Flagler Avenue
Key West, FL 33040
Cell: 305-304-2433 [email protected]
Copyright 2016 by Jim Smith, all Rights Reserved