You can’t turn on the news these days without hearing about personal financial problems and international economic failures.  Have these events affected Key West?  You bet they have!

It seems to have started when the real estate bubble began to deflate about eighteen months ago.  Housing prices had jumped at astonishing rates over a three to four year period, and mortgage money was plentiful and cheap.  Condos that sold for $250,000 in 2002 where selling for $650,000 in 2006.  There were more buyers than sellers and the prices just kept going up.

We all know now that many of the mortgages used to purchase properties were “sub-prime”, at high interest rates, with little or no money down, and with very little qualification documentation.  The mentality was “prices will go up forever”.

Here in Key West many of the homes were purchased by real estate agents/brokers.  They did some fixing-up on some and flipped them.  On others, they rented the properties to pay the mortgage, while the value increased.  A lot of money was made… until the “bubble burst”.

These problems were nationwide, not only in Key West.  But Florida, California and Nevada were the hardest hit.  Many of the homes purchased in Florida were either second vacation homes or speculative investments.  Not many homes sold in Key West were purchased by locals as a primary residence.

During 2007 we saw crude oil prices rise from $40 to $100 per barrel.  As a result, gasoline and diesel fuels jumped way up at the pumps.  Then in the first half of 2008, crude oil increased further to almost $148 per barrel.  These fuel increases really started to take a toll.  Not so much for local Key Westers, who use bicycles and scooters, but for those tourists that drive to Key West.

The economic problems have rippled through the country, but there are a few additional unique Key West problems… tourism and hurricanes.

Tourism is the life blood of the Key West economy. When tourists do not come, or spend less money in Key West, it’s immediately noticeable by the locals.  It hits their wallets quickly, especially those that count on tips to pay the rent.

Two tourist evacuations this summer had a severe effect on locals income.  Fortunately, neither storm caused any real widespread damage.  Unfortunately, there were no tourists to keep the economy going. 

Every bartender and server I have talked with has said the summer of 2008 is the worst they have ever dealt with financially, and some of these have been around a long time.  Tour boats and charter fishing boats are struggling to stay in business.  Hotels and guest houses are experiencing lower than normal summer occupancies.  It’s a tough summer!

October and November are usually busy months in Key West.  It is absolutely beautiful here this time of year.  Fantasy Fest is just around the corner with the World Championship Powerboat Races right behind.  Throw in the Parrot Heads in Paradise convention and Thanksgiving and we are all hoping to salvage a miserable summer economy.

Come on down and enjoy the only tropical island you can drive to!