At the beginning of June, Realtors in the Florida Keys were banking on something they called “pent up demand.” Sales were down that month by more than 20% compared to 2019 numbers.
A month later, sales exploded.
In Monroe County, sales of residential properties jumped 50% over 2019 numbers. In 2019, 191 homes sold. In 2020, the number soared to 286. In terms of dollar volume for the entire Florida Keys, that represents $209 million in sales, an increase of $72 million just for the month of July 2020 over July 2019.
The Upper and Middle Keys saw the biggest spikes in residential sales, while Key West remained stable, if slightly lower.
“I can’t get any refinances done because we’re so busy with the purchase volume,” said Lisa Feliciano, residential loan officer at CenterState Bank.
Middle Keys attorney Tom Wright has worked almost exclusively in real estate closings since 1987.
“I don’t think I ever imagined a year that there would be a pandemic and yet we are doing a record amount of business,” Wright said. “We are working seven days a week and I am happily paying my staff overtime.”
In comparing residential sales in Key West for 2019 and 2020, real estate broker Bascom Grooms of Bascom Grooms Real Estate said, “January 2020 was even with 2019; February 2020 was down by seven sales and March was even with 2019, but April started seeing a big drop-off, with 40% fewer sales in Key West, and May was almost 60% lower than 2019 as a result of us being closed to visitors in late March, which is typically our busiest time. Fortunately, things picked back up in June.”
July was only down by three sales compared to 2019 and August was already up by 11% with a week left in the month, Grooms said.
Like many real estate and lending experts, he attributes the pick-up in sales to record-low interest rates attracting second-home buyers as well as local buyers who are upgrading their homes.
Who’s buying?
National media has reported on population exodus from San Francisco, California and New York City, New York; including reports of moving companies turning away a tide of clients looking to leave the cities.
“We’ve seen a huge influx of buyers from bigger cities, echoing the national movement,” said Ally Kelley, a Realtor with Ocean Sotherby’s International Realty in the Middle Keys. “I’ve had a few clients from up north; the larger cities like New York City and Austin, Texas. But we’ve seen a ton of buyers from South Florida. The Keys are so accessible and these buyers from Miami and South Florida want a second home. If anything happens again they can escape down here and get out of the big city.”
Realtor David Grego of Island Breeze Realty in Marathon said his clients are from all over: Michigan, Wisconsin, New Jersey, Colorado and many from Florida as well. Grego said many of his clients are fulfilling a lifetime dream of owning a Keys home, spurred on by the uncertainty inspired by the pandemic.
“COVID-19 made people recognize this might be the right time. When I ask my clients, ‘Why now?’ they say it’s something they’ve been thinking about for a long time,” he said.
Wright said the diversity of buyers is also an outlier in 2020.
“We are seeing every type of property selling,” he said, “and an unusual amount of cash purchases, even on the large transactions.”
“We’ve found that people want out of big cities, and after spending so much
time in their homes, they’ve re-evaluated what they want and are either relocating or
finally making those second- or third-home purchases that they might have second-guessed in a more normal environment,” said Lauren Varney, marketing director with Ocean Sotheby’s International Realty.
Varney said the market is seeing a lot of buyers who are well into their working years, which provides them with the ability to afford those second or third homes. Also, since the Keys and Ocean Sotheby’s cater to “lifestyle sales,” Varney said people who are at a point in their lives where they are still working, but can breathe a little easier, tend to be the hottest buyer.
“And that’s only increased since COVID,” she said. “My agents have seen that a lot of their client’s businesses are streamlined to work remotely, and since we are considered a ‘secondary market,’ many of them do not live here year-round.”
Joy Martin, owner and broker at American Caribbean Real Estate, said they’re seeing buyers in all ages right now. Even the millennials are entering the market in a big way, she said.
“Remote work from home is now widely accepted and has provided for relocation opportunities outside of the cities. Outdoor living is in demand, and in the Florida Keys, that is where we thrive,” she said.
“I had one home buyer on Olivia Street actually move her closing date from April to March so she could quarantine in Key West as a homeowner,” Grooms said. “She wanted to be here for the pandemic, but couldn’t do it with the checkpoint until she owned property.”
What are they buying?
Since the start of the year, buyers are purchasing homes that average in the high $500,000s to the low $600,000 throughout Monroe County. In the Upper Keys, the median price in July 2020 has been $545,000 — a $72,000 increase over the previous year. In Marathon and the Lower Keys, the median sales price has increased from $477,000 to $602,000. Key West has seen a 9% increase, and the median sales price for July was $635,000.
The price point above applies mostly to single-family homes on a dry lot, or possibly condos with a water view.
Grego said his clients are searching in the “sweet spot” of $800,000 to $1.1 or $1.2 million. The bigger price tag, he said, is due to the low interest rates running about 2.5% to 2.9%.
“People are taking advantage of buying ‘more’ house with lower interest rates,” he said.
As for the median price in the Upper Keys, Ocean Sotheby’s agent Sarah Ewald said that it typically gets people two to three bedrooms with around 1,200 to 1,400 square feet of space on a dry lot.
“In our market, it’s often considered a ‘starter home’ for that price range,” Ewald said. “Square footage isn’t as much a factor as location, condition and proximity to water access (i.e. a public park or homeowner’s park with boat ramp). Those things add value to your property from a lifestyle standpoint, as most people that enjoy living in our area also enjoy spending time on or around the water.”
Grooms said the Lower Keys market, including Big Pine and Geiger Key, is seeing a lot of local buyers and first-time home buyers “because they have properties in the $400,000 range.”
Interest rates
Grego said the spike in residential sales might be directly tied to the national election coming up in November.
“Right now, interest rates are low; after the election, who knows what might happen,” Grego said. “Even if a Democrat is elected president, don’t expect the economy to change immediately; that takes two to three years. But the interest rates can be affected right away.”
Brain Tewes of Tewes Mortgage said he doesn’t think the interest rates will be affected by the election.
“This is all about COVID-19 and uncertainty about the economy,” he said. “I don’t think anybody who is alive today has seen interest rates this low. Fifteen-year mortgages are in the 1% range and 30-year mortgages are in the mid-2% range.”
The lower interest rates mean many of the buyers are locals.
“They can afford it with the lower interest rates. In some cases, the home’s mortgage payment can be compared to rent,” Tewes said.
Feliciano said the average rate on many mortgages have fallen to remarkable lows.
“Some are doing so much volume in refinances because rates are low. I’m doing more volume on purchases than on the refinance side,” Feliciano said. “Down here, it’s more purchase volume, at least for me, because there’s more purchases going on for our area.”
Grooms has compared the current uncertainty of the pandemic to the period following 9/11 in the United States, when people weren’t sure what would happen with the economy.
At the start of the pandemic, prior to the interest rates dropping, Grooms and other agents were losing contracts as buyers were concerned about their professional future, potential furloughs and income loss.
“I had two people walk away from contracts and lose a $10,000 deposit,” he said. “Others walked away during the inspection period when they could do so without being penalized.”
Going virtual
Even though the checkpoint at the top of the Florida Keys was lifted on June 1, the real estate market continues to include more virtual sales. Kelley said she’s shown homes and recorded inspections using live video calls.
“Even closings are happening virtually, using Zoom. The necessary parties are on the call and we watch each other sign the documents. It’s really interesting to see,” she said.
Grego said some of his clients wait to visit in person until the time of the closing. “I’m writing offers for clients who have not seen the property in person,” he said.
“Early on in the pandemic, we quickly adapted to a virtual communication and sales process whether it was through Zoom meetings, virtual open houses, or online property showings,” Varney said. “I think our society as a whole is finding that they can use their time more wisely and efficiently by adopting new practices in their lives, many of which are virtual.”
Martin said she’s seen virtual real estate business take off, with showings done virtually in real time with instituted video tours, Zoom consultation meetings and 360-degree tours. Even closings are being conducted virtually.
“Travel is still an issue for some, and the virtual ability to see a home or even do a pre-closing walk-through has worked out well for many,” Martin said. “Of course, many of us in the industry prefer the personal connection where you see someone fall in love with a property in person, but we are here to accommodate the buyers of today and share our expertise to make it happen.”
Nancy Swift, a Key West and Lower Keys Realtor with Location 3, has been using virtual technology for closings and showings, as has Grooms and nearly all other Realtors in the Florida Keys and beyond.
Swift had a conference call Aug. 26 “with a gentleman from California who we just closed to build him a brand new, $2.3 million home with five bedrooms and five-and-a-half baths on Key Haven, sight unseen.”
The new upscale, residential development called Key Haven Estates, about a mile outside Key West, has been more than a decade in the making, but construction is now booming at the site, where buyers can choose from seven different home models to be built on waterfront lots.
FaceTime home tours are becoming the norm, Grooms said.
“I had a property on Geiger Key close in June, and the buyer never set foot on the property until July,” he said. “But people love the FaceTime tours. I’ll start out with them on FaceTime, standing on the street out front. I’ll walk them through the front door, the kitchen, all the upstairs rooms and closets and the yards. Most buyers will do that sort of tour first, after they’ve submitted an offer that’s been accepted, then they’ll fly down. But plenty of buyers have been comfortable with sight-unseen sales.”
He added that the state of Florida also now allows for e-notaries to notarize necessary documents.
“I think since the pandemic started, people have gotten more comfortable with virtual technology, FaceTime tours and Zoom calls,” he said.
Sellers’ market
The record residential sales are taking place during a time of fewer listings. Since the beginning of the year, the Keys has only recorded three months where the number of listings was greater (and not by much) than in 2019. In the Middle and Upper keys, the number of listings was at its lowest in April, with only 58 new listings on the market in the Upper Keys and 45 in the Middle and Lower Keys. April was also the lowest month of new listings in Key West, with only 53 new homes on the market.
In the Middle and Lower Keys, 2019 saw 1,300 new listings; so far in 2020, only 833 new homes have been listed for sale. In the Upper Keys, 2019 had 1,500 new homes on the market, while 2020 has just cleared 850. In Key West, the total number of new homes on the market in 2019 was 1,290. So far this year, only 846 have been listed.
Wright, the closing attorney, is hearing from Realtors that many homes on the market are getting more than one offer. Some contracts have back-up offers. That’s unusual.
“We’re all scratching our heads on how this has become a sellers’ market,” he said. “There are low interest rates, of course, but that doesn’t explain all the cash deals. All parts of the market seem to be extremely busy.”
Martin said it’s great to see all segments of the market experiencing a surge in activity. There have been some notable significant luxury sales as well, in the $5-million plus range. The biggest challenge now? Martin said it’s the inventory.
“Ultimately, that will affect the amount of future sales,” she said.
“If you’re looking to sell, let me know!” said Kelley, with a smile in her voice.
