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Florida Keys has long been a popular tourist destination among those looking for a quick trip to a tropical paradise. But recently, more people are looking to enjoy the beachfront lifestyle, breathtaking sights, and vibrant city center on a more regular or permanent basis. They’re looking to invest in the Key West, FL real estate market.
What makes Key West, FL an alluring choice? For one, it’s located closer to Cuba than Miami, and this proximity to Cuba is reflected in the culture and the architecture. Here you’ll find tin-roofed conch houses and gingerbread mansions that draw inspiration from the island city’s Cuban and Bahamian heritage.
Thinking about moving or buying a second home in this oasis? This guide will take you through the current and predicted state of the real estate market Key west.
Overview of the Key West, FL Real Estate Market
Things are looking bright in the Key West, FL real estate market. In July 2022, Key West was considered a balanced market, with the supply of homes, on the most part, being able to meet the demand. Home prices, however, are starting to rise steadily along with growing demand for properties in this area.
Median home prices for Q1 and Q2
How much will you be spending on Key West luxury homes?
Over the past months, properties in Key West have seen an increase in value. In July 2022, the median listing house price stood at $1.16 million, and the median listing price per square foot was at $948. This is a 35.4% increase compared to the figures reported during the same period in the previous year.
This is also the highest median price of 2022 in the Key West, FL real estate market, higher even than the average median listing price during Q1, which reached $977,000. The figure first hit over the million mark back in May 2022, when the median listing price in Key West reached $1.1 million.
These luxury homes for sale in Key West, Florida, however, don’t necessarily sell at listing price. As of July, the sale-to-list price ratio was at 98.5%, with properties sold for 1.5% below their asking price. This has been the trend observed throughout the year, except for January and March, when properties were sold above their asking price. This does suggest that though house prices are still appreciating, sellers expectations are being tempered slightly by what many are calling a normalizing of the market.
Key West, FL luxury real estate tends to stay on the market for more than a month. On average properties are sold after 54 days in the market. Throughout 2022, properties were sold within 49 to 70 days after being listed. This is quite a change compared to the previous year, when at its longest, properties stayed on the market for as long as 151 days.
For sellers, note that buyers tend to have preferences when it comes to the features and amenities of properties in the Key West, FL real estate market. Based on recent analyses, by homevalue.com, homebuyers prefer one-story homes with a single bathroom and a garage that can accommodate up to three cars.
Predictions and forecast
Early this year, CoreLogic’s Home Equity Report named Key West, FL as one of the areas with the highest increase in average home equity. According to the report, the average home equity for properties in Key West was at $657,700 during the last quarter of 2021, which was a 68% increase compared to the numbers reported during the same period in 2020.
What caused this increase in Key West, FL’s average home equity? Experts attribute it to the ongoing migration away from densely populated urban areas. The pandemic caused many homeowners to reevaluate their wants and needs in a home, and many are now favoring properties that offer space to accommodate working remotely.
Key West is one of the few outliers in CoreLogic’s Home Equity Report, as cities in the Mountain-West region dominated their list of the highest increases on average home equity. This, however, only highlighted the demand for having natural and outdoor amenities, especially among those looking for second homes.
Will Key West continue to be a balanced market? All the signs, such as the increasing median listing prices and the decreasing number of days listed in the market, might indicate that the area could likely be a seller’s market before the year ends.
Economy and the housing market
The economy certainly could be stronger, of that there is little argument. Inflation is higher compared to previous years, so many are worried about a contraction in the economy.
However, Key West realtors and experts are buoyant about the economy, confidently stating that the situation now is far different from the conditions that led to the 2008 housing crash and recession. For one, though real estate markets nationwide are dealing with a record-low housing supply, demand for real estate properties remains high. With high demand, buyers are still facing strong competition for properties, giving sellers the incentive to keep their listing prices high.
Real estate experts expect the high demand for properties to last for some time. In fact, this demand may remain more or less the same throughout the decade. Millennials, who currently compose the highest demographic in the US, are now at the peak of their first-time home buying age. With over 72 million Millennials in the US, most of whom are looking to buy a home for the first time, there is the market and the desire to fuel strong demand for homes for the next few years.
Generation X and the Baby Boomers are also still active in the market. The difference being that these demographics are generally in a much stronger financial position given their age.
These 2 demographics are much less likely to be hampered by rising interest rates. Indeed many of these buyers will be looking to buy second or vacation homes. They may also be looking to invest in property for rental purposes. These 2 demographics are more likely to be interested in buying higher priced luxury homes.
Mortgage rates and first-time homebuyers
In the current climate, it may seem that first time home buyers will be squeezed out of the market. In Key West, the mortgage rate for a 30-year fixed loan stands at 5.27%. This is close to the national average of 5.55%, a significant increase compared to the mortgage rates recorded last year.
With these mortgage rates, first-time homebuyers might hold off making a purchase for a while, which, in turn, may lessen the demand for properties and result in a slower price growth. However, there are signs that first-time homebuyers are looking into mortgages despite the high interest rates. Though demand for mortgage is currently lower than in the last few months,, the Mortgage Bankers Association noted an increased demand for loans with low down payments. This, according to the association, could be a sign that first-time homebuyers are slowly braving the real estate market once again.
Experts predict that the mortgage rates, which were mostly unstable during the first half of the year, will gradually stabilize to somewhere near 6% before the year ends.
Demand from international buyers and investors
Now that the US has lifted most of its pandemic travel restrictions, international buyers are slowly but surely reentering the real estate market. Buyers from Canada, the UK, Germany, and France have begun to look at properties in places like Key West.
Affordable homes over luxury homes
As mentioned earlier, affluent buyers from the Northeast, such as Washington and New York, as well as buyers from California have been investing in luxury properties in Florida during the first half of 2021. This has caused the prices for luxury homes to rise.
However, with rising mortgage rates and buyers being a little more cautious, they may be more likely to look at properties that won’t overly stretch them. In fact, affordability will be one of the major drivers of buyer activity in the real estate market.
During and even before the pandemic, it was noted that luxury homes boomed. The luxury market’s time in the spotlight has by no means come to an end, but it’s likely that more affordable homes will be in bigger demand. At least in the near future.
Home sales amid a low supply
With the ongoing post-pandemic migration to Florida, and as the population continues to grow, the supply of homes in places like Key West is unlikely to keep up with the demand. This, in turn, is keeping prices high in the Key West, FL real estate market.
As prices continue to stay high, properties might receive fewer offers from buyers, but as mentioned earlier, there is still enough demand to encourage homeowners not to drastically cut their asking prices, though they do seem more likely to accept bids slightly lower than listed.
Aging condos turned into lucrative investment opportunities
While home buyers prefer new properties, investors are also looking at older ones. Specifically, they are searching for aging condominiums that they can refurbish into new luxury homes. Again, we see the demand for luxury properties undiminished, even in a time where there is more caution in regards to the state of the economy.
As properties age, repair work becomes more frequent and more expensive. Owners of these aging condos and properties are finding it less viable to keep up with high maintenance and repairs, and many have decided to cash in. Investors are now looking at these condos as an opportunity for new developments. They are confident that they will be able to sell these properties.
For condo owners, this is a much better option compared to continually paying for repairs and maintenance. Most of the time, these buyout offers can go well beyond the property’s market value.
New developments in Key West
There are new property developments in Key West, FL that can go some way to alleviate the growing issue of low housing inventory. Most of these developments, however, are still far from completion.
One of these developments is the 280-unit apartment complex called Wreckers Cay. Located on Stock Island, this new housing community stands on the site of a former trailer park and will span nine oceanfront acres. The complex was partially completed in summer of 2022.
Another apartment complex, the Garden View Apartments, is in development on College Road. Sponsored by the Key West Housing Authority and the City of Key West, this 103-unit apartment complex will offer affordable housing for individuals and families with varying income levels.
Recently approved was a proposed housing complex at Truman Waterfront. This long-term ground lease, which has been in the pipeline for over 20 years, will have a total of 168 affordable housing units, consisting of both rental units and owned townhomes.
Is now a good time to buy Key West Real Estate?
Given these trends and factors that are affecting the Key West, FL real estate market, one question remains: is it a good time to buy a property in this popular vacation destination?
As house prices in Key West continue to rise, now is the perfect time to buy the home of your dreams before demand rises even further and homes become even more expensive.
Working with the real estate professionals
Real estate experts advise that you gain a deep knowledge of the local housing market’s conditions, since it moves quickly and could change at any given time. That’s why you’ll want to work with a professional with a nuanced understanding of Key West’s real estate market.
Make your way through the competitive Key West, FL real estate market with the help of the professionals at the Lisa Ferringo Group. Lisa has made a mark in the Florida Keys real estate market as one of the most trusted realtors in the area. With over 33 years of professional experience in real estate, 18 of which were dedicated to the Florida Keys, you can be assured that you’re working with someone who knows the real estate market from top to bottom.
Working with Lisa means working with the Number One Realtor for residential sales in Florida Keys since 2015.
Gain a valuable edge in the competitive Key West, FL real estate market and work with The Lisa Ferringo Group to find your home in Key West. Start the conversation by calling today at 305.797.1221, or by sending an email here.