Volume 13, Number 2 Spring 2014

Florida Keys Real Estate Market Comparison: January March 2014 vs. 2013
*Source: Tri-Services Multiple Listing Service (MLS) Board Key Largo To Key West

Green (+) Red (-)

Total Number of Sales as of 03/31/14: Avg. Sales Price as of 03/31/14: $ Value of Sales as of 03/31/14: Sale Price to Original List Price as of 03/31/14: Sale Price to Final List Price as of 03/31/14: Avg. Days to Sell as of 03/31/14: Pending Transactions as of 03/31/14 Number of Properties Listed For Sale as of 03/31/14: Avg. List Price Properties For Sale as of 03/31/14: Months of Inventory as of 03/31/14:

Upper Keys
Lower Matecumbe to Key Largo

Middle Keys
7 Mile Bridge to Long Key

Lower Keys
Bay Point to Big Pine

Key West
Key West to Shark Key

All Areas
Keys-Wide

ALL AREAS 2013 599 $405K $244.2MM 78.15% 90.27% 276 N/A 2,981 $714K 15

-8% Less 164 +24% More $475K +13% More $77.9MM +12% More 89.99% +2% More 93.32% -28% Less 210 85 -9% Less 877 +3% More $774K No Change 16

-14% Less 116 +22% More $431K +5% More $50MM +13% More 89.72% +3% More 91.06% -3% Less 232 86 -6% Less 547 -9% Less $700K +9% More 14

+20% More 118 +6% More $362K +28% More $42.8MM +11% More 89.23% +7% More 93.48% -29% Less 209 44 -9% Less 566 +24% More $628K -25% Less 14

-7% Less 173 +18% More $594K +9 More $102.8MM +25% More 89.87% -1% Less 93.41% -41% Less 164 38 +8% More 877 -1% Less $783K +16% More 15

-5% Less 571 +18% More $479K +12% More $273.6MM +15% More 89.70% +3% More 92.82% -26% Less 204 253 -4% Less 2,867 +31% More $734K No Change 15

KEYS-WIDE MARKET OVERVIEW The Sales of 571 properties is a decrease of -5% from the 599 for 2013. Nevertheless, with the exception of 2013, the 2014 Q1 sales exceed those of every year dating to 2006 when the total was 403. The $479K Average Sale Price (ASP) increased +18% over the $405K for that period last year. For 2013, the ASP increased +8% after having declined during the first quarter year-to-year since 2007. The largest drop was -32% in 2009 ($419K) vs. 2008 ($618K). The $479K ASP for 2013 is a reduction of -45% since the peak of $869K in 2006 and places the current ASP back to that of 2004. The Dollar Value of Sales (DVS) rose +12% to $273.6MM compared to $244.2MM for 2013 as a consequence of the +18% increase in average sales price, compensating for the -5% decrease in sales. The 2014 Q1 DVS is the highest since 2006 ($341MM) with the Q1 peak occurring in 2005 with $584MM. 2009 had the lowest DVS, $138MM. Average Days to Sell (ADS) declined -26% to 204 days from the 276 as of March 31, 2013. (ADS is a measure of the number of days between the date the property was listed and the date the sale closed.) The Sale Price-to-Original List Price (OLP/SP) increased +15% to 89.70% from 78.15% during last years Q1. (The OLP/SP compares the sale price of the property to the list price of the property at the time it first came on the market versus the list price at the time the contract was written, thereby providing a measure of the mismatch between many sellers initial list price and the market price acceptable to buyers.) This ratio will continue to increase as the market improves. The first quarter nearly equaled the best the ratio has been, 89.73%, which occurred in 1999. The lowest was 62.49% in 2009. The Sale Price-to-Final List Price (FLP/SP) of 92.82% is an increase of +3% from 90.27% in 2013. (The FLP/SP compares the sale price of the property to the list price of the property at the time the contract was written instead of the time the property was first listed, and reflects the average percentage of the final listed price that buyers are paying for properties that have sold.) This ratio will also continue to improve with the market. The peak for this ratio was 94.85% in 2004 with the lowest, 87.10%, occurring in 2009. The margin between the OLP/SP (89.70%) and FLP/SP (92.82%) is 3.1%, which indicates, on average, a seller can anticipate price reductions during the term of the listing of about 3% from their Original List Price to the Final List Price prior to receiving a buyers offer, a new low. The previous low, 7%, occurred during 2001 and 2005 with the largest reduction being 25% at the end of 2009. Additionally, sellers and buyers today can expect the contract price, on average, to be nearly -7% less than the Final List Price. From 2001-2005, that average was -5% with the highest being -12.9% in 2009. The 2,867 Properties for Sale at the end of Q1 is -4% less than 2,981 on that date in 2013 and is a -44% reduction from the peak of 5,084 in March of 2007. This is the single most important measure of the continued improving market and we anticipate the decline to continue. (continued on page 4)

Comparison of Keys Market Areas and Property Types for the First Quarters of 2014 vs. 2013
The highlight of Q1 sales is the overall +18% increase in average sales price for all property types ranging from +24% in the Upper Keys to +6% in the lower Keys. While we predicted that price increases in 2014 would exceed the +6% of 2013, we did not anticipate such a sharp increase in the first quarter. To better understand this significant increase, we looked at changes in the number of sales and sales prices of single family waterfront (SFW), single family non-waterfront (SFNWF), condo/ townhome/duplex/half-duplex (CTD), lots and land (LL) commercial, boat slips (BS) and mobile homes (MH) for each of the 4 Keys market areas as well as the percentage contribution of each property type in each market area to the total. (Reference the chart on page 3). Upper Keys Market Area: Despite a -15% decrease in number of sales, the ASP for SFW increased +41%. This property type accounted for 27% of the total sales activity for the market area and is the primary factor in the +24% overall increase in ASP for the UK. The SFNWF, which generated 25% of the market area sales even though the number of sales was down -13%, experienced an ASP rise of +17%. The CTD group had the largest increase in number of sales for the UK, +33% with a +20% increase in ASP, and made up 22% of this market. MH sales, though decreasing in number by -12%, had a +7% growth in ASP. With 14% of the sales for this market (which was the largest Keys-wide for MH market area sales), it meant residential properties account for 78% of the UK market area. Lots and Land, with no change in number of sales and a -4% decrease in ASP, comprised 11% of the market. The two Commercial sales accounted for just 1% of all sales and there were no sales of Boat Slips. Middle Keys Market Area: SFW sales increased +18% with a +33% increase in ASP over Q1 2013, and was the primary reason for the overall +22% increase in ASP for the Middle Keys, accounting for the second highest total sales activity with 28% of the MK market. The largest market factor, 39%, was the CTD group despite sales declining -21% from last years Q1 and with no change in ASP. SFNWF, which saw sales decline -44%, also had no change in ASP while generating just 8% of the MK sales, thereby ranking fourth for market share after Lots and Land. Lots and Land had a +45% increase in number of sales, the ASP was up by +17% and the category provided 14% of the sales for the MK market. Boat Slips produced 6% of the market activity despite sales declining -30%. Their ASP dropped -14%. Mobile Homes sales were down -20% with the ASP off by -21%, and accounted for 3% of the MK sales. Commercial sales generated only 2% of this market area as the number of sales was down -71%; therefore, the +47% increase in ASP had little impact on the overall ASP for the Middle Keys. Residential sales accounted for 78% of the Middle Keys market during Q1 2014. Lower Keys Market Area: This market area is dominated by SFW sales which accounted for 52% of the sales in the LK. The number of sales rose by +24% and the ASP was up by +12%. The second-largest category of sales by property type was Lots & Land with 21% of the market as a result of a +25% increase in number of sales and an +8% increase in ASP. These two property types were the main reason the market area ASP rose by +6%. SFNWF had the largest increase in number of sales, +33%, yet generated just 13% of the sales. Their ASP declined by -5%. Mobile Homes sales were up +18% with a +20% increase in ASP and produced the fourth-highest percent of sales, 11% for the Lower Keys. There were no Boat Slip sales and just two commercial sales. For the Lower Keys, residential properties accounted for 77% of all sales. Key West Market Area: The Key West market is dominated by CTD properties, which constituted 48% of the sales for KW. This segment of properties increased in sales by +36% and with a +30% jump in ASP. The second-most popular property type was SFNWF with 35% of the market despite sales declining by -18%. The ASP did go up by +18%. SFW accounted for just 5% of the KW market sales as there is a relatively small percentage of SFW in the KW market area compared to the other three market areas. MH accounted for 4% of the market which means that residential properties comprised 92% of the Key West sales during Q1 2014. Commercial sales were up by +14%, and the sale of a large parcel of land in Stock Island accounted for the big growth in ASP over last years Q1. Boat Slips made up just 1% of the KW sales. Now that we understand which property types by market area have contributed the most to the overall increase, the question is: why did prices rise so sharply in 2014s first quarter? One major reason is the reduced impact of the number of distressed property (short sales and bank owned) listings and sales. One year ago, 10% of all listings Keys-wide were distressed which accounted for 20% of all sales, while during 2014s Q1 only 7% of all listings were distressed, accounting for only 8% of all sales. Other contributing factors include the overall reduced inventory of properties for sale as well as the improving U.S. economy.

First Quarters of 2014 vs 2013 by Property Type & Market Area

Market Area
# Sold % Chg vs 2013 Avg Sale Price % Chg vs 2013 % of Mkt. # Sold % Chg vs 2013 Avg Sale Price % Chg vs 2013 % of Mkt. # Sold % Chg vs 2013 Avg Sale Price % Chg vs 2013 % of Mkt. # Sold % Chg vs 2013 Avg Sale Price % Chg vs 2013 % of Mkt. # Sold % Chg vs 2013 Avg Sale Price % Chg vs 2013 % of Mkt. # Sold % Chg vs 2013 Avg Sale Price % Chg vs 2013 % of Mkt. # Sold % Chg vs 2013 Avg Sale Price % Chg vs 2013 % of Mkt. # Sold % Chg vs 2013 Avg Sale Price % Chg vs 2013

UK

MK

LK
62 24% $537K 12% 52% 16 33% $250K -5% 13% 1 100% $380K 27% 1% 25 25% $81K 8% 21% 2 -50% $379K -54% 2% 0 0% $0K 0% 0% 13 18% $171K 20% 11% 118 20% $362K 6%

KW
8 -50% $1,014K 12% 5% 60 -18% $795K 18% 35% 84 36% $465K 30% 48% 4 N/C $738K 113% 2% 8 14% $1,101K 199% 5% 2 -33% $85K -38% 1% 7 N/C $130K -13% 4% 173 -7% $594K 18%

Single Family - Waterfront 44 33 -15% 18% $1,056K $809K 41% 33% 27% 28% Single Family - Non Waterfront 40 9 -13% -44% $278K $230K 17% N/C 25% 8% Condo/Townhome/Duplex/Half-Duplex 36 45 33% -21% $375K $335K 20% N/C 22% 39% Lots & Land 18 16 N/C 45% $134K $236K -4% 17% 11% 14% Commercial 2 2 -33% -71% $975K $880K 195% 47% 1% 2% Boat Slips 0 7 0% -30% $0K $36K 0% -14% 0% 6% Mobile Home 23 4 -12% -20% $206K $107K 7% -21% 14% 3% All Properties By Market Area 164 116 -8% -14% $475K $431K 24% 22%

(continued from page 1)

The 15 Months of Inventory (MOI) is the same as at the end of Q1 2013 and represents a drop of -72% from 55 MOI on March 31, 2008. (MOI provides a measure of the rate of sales versus the supply of properties and is also known as the absorption rate.) The Average Listed Price (ALP) of $734K is down -4% from the end of March 2013. The ALP peak was $990K at the end of 2007. It has decreased -26% over the past 7 years which places the ALP close to that of 2004. MARKET AREA DETAILS Number of Sales: Contrary to the year end results for 2013 when sales increased in all Keys markets, only the Lower Keys sales continued that trend with +20% rise during Q1 2014 to 118 compared to 98 in 2013. The Middle Keys had the biggest decline, -14% to 116 from 135 in Q1 2013, followed by the Upper Keys at -8% with 164 sales, versus 179 the previous year. Key West declined -7% to 173 compared to 187 a year ago. Average Sale Price (ASP): The ASP is up across all market areas with the Upper Keys leading with a jump of +24%, $475K vs. $383K during 2012. The Middle Keys ASP increased +22% to $431K compared to $353K. Key West was up +18% going from $504K to $594K, followed by the Lower Keys with a +6% rise to $362K over the $342K in 2012. Dollar Value of Sales (DVS): All market areas also realized positive growth in the DVS with the Lower Keys rising by +28% to $42.8MM versus the $33MM during 2013. This was followed by the Upper Keys which was up +13% to $77.9MM over $68MM a year ago. Then, Key West with $102.8MM compared to $94MM last year, an improvement of +9%. The Middle Keys change was the lowest at +5% to $50MM from $47MM in 2013. Average Days to Sell: Key West at 164 compared to 276 in 2013 declined -41%. The Lower Keys followed being down -29% to 209 from 296 the previous year. The Upper Keys was next at -28% to 210 versus 290 days last year. The Middle Keys had the lowest decline, -3% to 232, compared to 240 at the end of 2013. We continue to believe the average sale periods reported are artificially low as they do not accurately account for a property having been previously listed with one or more brokers prior to being sold. Number of Properties For Sale: All market areas experienced a reduction in Properties listed For Sale compared to 2013 except for Key West which increased +8% to 877 from 814 in 2013, and 821 in 2012. The Upper Keys and Lower Keys had the largest declines, -9% to 877 from 959 and 566 vs. 624, respectively, in 2013. They had 1,097 and 631 properties for sale in 2012. The Middle Keys dropped by -6% to 547 compared to 584 and 662 during 2012. Months of Inventory (MOI): MOI declined -25% to 14 from 19 in the Lower Keys with the large increase in sales and there being fewer properties for sale. The Upper Keys remained at 16 MOI while Key West grew by +16% to 15 versus 13 MOI in 2013. The Middle Keys rose +9% to 14 from 13 MOI during Q1 2013. Average List Price (ALP): During the first quarter, the Lower Keys ALP increased +24% to $628K from $507K. The Upper Keys ALP price rose +3% to $774K from $749K. The Middle Keys was down -9% at $700K from $767K, while the Key West ALP decreased -1% to $783K from $792K. What do the Numbers Forecast? The biggest story in these results is the across-the-board increases in average sales price ranging from 6% in the Lower Keys to 24% in the Upper Keys. In comparison, the increase during all of 2013 was 6%. We will address that increase in more detail on page 2 of this newsletter. The slowdown in number of sales mirrors the rest of the nation and tempers our predictions for the coming months. The continued decline in the listing inventory will likely continue unless the number of sales continues to decline year over year. The margins between list price and sales price continue to compress toward all-time records, while average days to sell has also consistently declined to average less than seven months. With the exception of number of sales, the market continues to improve in all areas and all measurements, trends we believe will continue.

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