As a 60+ year-old real estate firm with offices from Key Largo to Key West that tracks and analyses the market, we’re uniquely positioned to comment on the effects of Hurricane Irma on the Keys-wide real estate market. We have first-hand experience with the physical and market recovery of the Keys from storms dating back to Hurricane Donna in 1960 followed by Betsy in 1965 all the way through Georges in 1998 and Wilma in 2005.
While the physical recovery from Irma is in full swing, the real estate market recovery will take time to fully understand, but positive signs are already apparent. We know that newer homes built to the latest building codes weathered recent storms much better, and while still tied to the market as a whole, held their values well. In fact, we’ve sold a number of newer and/or undamaged homes since Irma in the hardest hit areas at pre-Irma prices which suggests that the market, going forward, is much more resilient than in prior storms. We also expect that the vast majority of pending sales awaiting closing prior to Irma will proceed to closing now as well.
The post-Irma market is decidedly different than after prior storms for several reasons.
The physical recovery is generally going much faster in most areas because utilities were quickly reestablished to most neighborhoods. When Hurricane Donna knocked out the Tea Table bridge and the water line with it, it was months before road access and utilities were restored. This time, the availability of water and electric along with quick responses from local, state and federal government agencies has fueled the recovery from Irma faster than prior storm events. Many parts of the Keys had power long before the mainland.
The economic and financial conditions today are also generally better than before or after Georges or Wilma. Wilma signaled the end of a real estate boom in the Keys. At the start of 2005, sale prices were increasing at unprecedented rates and many traditional buyers were priced out of a market with unsustainable prices averaging over $800,000 coupled with low inventories of properties for sale. As 2005 progressed, those inventories began to grow signaling that the market was starting its inevitable cyclic decline. By the time Wilma struck in October, inventories had grown from 1,500 to 2,500 listings, and then skyrocketed to 4,500 within 90 days after the storm. 2004 and 2005 were some of the most active hurricane seasons ever. People were simply worn out and many decided to leave rather than suffer another year of storm warnings and events. That exhausted psychology was punctuated by the subprime crisis which continued the market slowdown through 2013. The market finally recovered and stabilized in 2015.
None of the factors that led to the increase in listings in 2005 exist today. The recent market has been stable in the number of listings for sale, number of sales, average sales price and sale price-to-list price ratios which does not signal any inherent weakness in the market. With a current average sale price under $600,000, the market has a lot of room to move upward in price. Interest rates are relatively steady and low, and there are no other outside forces which appear to be acting on the market as was the case after Wilma.
Accordingly, the real estate market will largely be shaped by the psychology of sellers which will be evidenced by the number of properties listed in the coming weeks and months. There is a well-documented, inverse relationship between listings for sale and sales (buyers). If sellers respond to Irma by putting large numbers of properties on the market, the market will record fewer sales and prices will be impacted. One month after Irma, however, there are fewer properties for sale than before the storm. If the market is not flooded with new listings, the market will largely not be affected in terms of price, and the number of sales will return to pre-Irma stabilized levels.
We’re optimistic about the market recovery; not based on hope but on our knowledge and analysis of the market and the forces at play which are currently stable and strong. After living and working through over a dozen hurricanes through the years, we recognize that storms are a fact of Keys Life from which we have recovered and will continue to do so.
GET A COPY OF THIS REPORT email lela@CBschmitt.com or visit www.SearchFloridaKeysHomes.com call Lela 305-395-0814
