This Partially Gutted Cottage Just Sold for $615,000 in Key West

The high price of this Key West cottage shows just how red hot the housing market is.

In May of 2021, the median list price of properties in Key West hit $877,500. This is a 9.5% year-over-year increase compared with May of 2020. Key West, like many places in Florida and throughout the United States, is seeing a surge in housing demand and a shortage of inventory that has created a strong seller's market.

To understand just how expensive homes in Key West have gotten, look no further than a 768-square-foot cottage that just sold for $615,000 -- even though the home is partially gutted.

An under-construction home fetches a high price

The Key West cottage that sold for $615,000 was first built in 1943. It's a one-story space with just two bedrooms, and the property hasn't seen any major updates since 1995. Despite that, the price per square foot topped $800, which is a shocking amount of money when you consider the fact that the owner will have to sink a fortune into finishing up the home.

This old town cottage on Olivia Street was under renovation at the time of the sale, and the home is torn apart throughout. Pictures reveal a number of issues, including:

• No appliances
• Missing cabinets
• Open walls with wires hanging out of them in many rooms
• Missing walls
• Absent plumbing fixtures
• Exterior steps in need of repair

The property is, unsurprisingly, described as a "fixer upper," with endless potential. But to be able to tap into that potential and make the property their own, the buyers had to pay a whopping $615,000. With so much remaining work to do, this is likely to only be the beginning of the costs they incur to make the property their new home-sweet-home.

The cottage does come with some amenities, though, including off-street parking. And its location may have played a big role in attracting buyers to purchase it on June 7, 2021, after it was listed for sale in March of this year.

With a fixer-upper cottage fetching such a high price, home buyers in Florida need to know that the cost per square foot on properties in high-demand areas is likely to be very expensive right now. There are a limited number of homes for sale, and many people want to purchase properties to take advantage of the fact that mortgage rates still remain competitive, even after rising slightly from the record lows we've seen this past year.

Buyers should avoid stretching their budgets too much just to get into a property, even though homes are commanding high prices. It's also more important than ever to shop around for a mortgage to get the best possible rate and to do careful research before making an offer on a property to ensure you're paying a fair price.

It's easy to get caught up in the frenzied market and offer more than you should for a property, but that's a decision you could come to regret. So keep a level head as you look for homes in Key West or elsewhere across Florida or the United States.