Thursday, December 16, 2004

Rent Ratios

Terry Ln 1
Originally uploaded by kwshoes.
Rent Ratios, according to this blogger, could be signaling a coming crisis in residential real estate investments (as opposed to home ownership). While the writer's discussion is a macro view at the national level, the real estate market in Key West is perhaps a microcosm of this macrocosm, since real estate prices have been peaking year-over-year here, and throughout the Keys, for the past several years.

When we arrived here in 1999, we settled in with the intention of only living here for a fixed time, three to five years. It turned out to be three-and-a-half years. Therefore, we made a conscious decision to NOT buy, but to live here as renters. The rents then were high, higher by half again as much as we were paying in New Hampshire at the time. People told us over and over again that we should buy something, almost anything, that real estate was best place to put our investable dollars for the best return.

As it turned out, those people were right. Had we bought a property, any property in 1999, it might well be worth two, three or four times today over what we would have paid then. I thought then, as I do now, that the bubble would some day burst. But there's no denying that we could have made a huge profit had we made that move.

Turning to the rental side, we moved back into our former quarters here on Thomas St., which we left about two years earlier. The rent had risen by $200 a month, or about 17%, but the increase in average selling prices of real estate was three times that amount.

I've mentioned before the 2/1 condo next door that's on the market for $988,000. Behind us, on Terry Lane, there's an old shack that's being rehabbed for eventual sale for $1,975,000. Granted, neither of them might actually realize those asking prices, but they're indicative of how the market's moving.

UPDATE: Average Sales Prices

(The Coldwell Banker price index is based on a 2,200 square foot single-family home with 4 bedrooms, 2 1/2 bathrooms and 2-car garage in neighborhoods where corporate middle-management workers would live.)

FLORIDA Key West $759,499
Pensacola $169,975
Variance -$589,524

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