“The market forecast continues to indicate … that the fourth quarter will be the most positive it has been in a number of years,” says an analysis from Florida Keys real estate company Coldwell Banker Schmitt.

But while home prices went up overall, the improvement was confined to the upper end of the market.

From July through September, 96 homes, condominium units and mobile homes sold in the Upper Keys, up from 73 during the same period last year. In addition, the average sales price rose 22 percent, from $375,000 to $456,000, Mutliple Listing Service statistics.

Pending sales figures are also encouraging. Some 139 homes were under contract at the end of September, up from 78 at the same time last year. And market inventory for all Upper Keys properties, including commercial locales, was at 18 months, down from 29 months in September 2010.

MLS data does not capture homes listed and sold at the Ocean Reef Club, nor does it include those that are not listed with an agent.

Keyswide trends were similar to those in the Upper Keys. From Key West through Key Largo, the average residence cost $425,000 during the third quarter, up 16 percent from last year. A total of 329 residential properties sold between July and September, up from 269 last year.

The increases, however, were not spread evenly. The median home price, which is the number at which half of the residences cost more and half cost less, dropped 5 percent in the Upper Keys, from $335,000 last year to $320,000 this year. Keyswide median home prices rose a modest 2 percent.

Open-water homes, which took a dive last summer as the Deepwater Horizon oil spill lingered in the Gulf of Mexico, fared the best this time around, according to MLS data prepared by Tracy Larson of Schwartz Property Sales.

In the Upper Keys, 18 open-water homes sold between July and September at an average price of $1.2 million. Last summer only four such homes sold, fetching an average of $850,000.

Prices for canal-front homes were up 24 percent, to an average of $679,000, while sales numbers remained flat.

But the cost of condos and non-waterfront homes went down. Forty-eight dry lot properties sold for an average of $244,000 from July through September, off 8 percent from last year, when the average cost of the 35 properties that sold was $263,000.

Condos fared worst of all, according to the Schwartz data, dropping in both value and number of sales. The 21 condos that sold during the third quarter this year were purchased for an average of $281,000, down 12 percent from the 25 condos sold during the same period in 2010.

Local agents say that the varying fortunes of higher-end and lower-end properties suggest that buyers with means have begun to view upscale real estate as a good investment after years of looking elsewhere.

“Cash buyers are starting to buy at these great prices”, say Pete Riveiro of Remax Keys Properties. “It’s all about supply and demand. The supply of listing has decreased while the demand has remained constant or even increased because of our prices,” Riveiro continued.

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Sales in the first three months of the year were up 20 percent from the same period last year, and the number of pending transactions was up 27 percent.

Many Keys real estate professionals see both numbers as a sign that the Keys real estate market is finally pulling itself out of the depths to which it sunk under the weight of a faltering economy and a flood of defaults.

“It’s been a great start to 2011. Demand is the same or better, but the supply of homes has dropped and there has been a slight bump up in prices.” Pete Riveiro, Key Largo Realty.

For many parts of the Keys, it’s been an amplification of a trend first seen in the beginning of 2010, when a brisk sales pace was setting the island chain up for a good year. Realtors were optimistic then that the tide was turning.

But it didn’t take long for the Gulf of Mexico oil spill to knock the wind out of their sails. While no oil came near the Keys, a lot of buyers — and potential buyers —were afraid their vision of a waterfront paradise was going to be covered in oily goo instead of blue-green water.

Agents know there is still a lot of pain reverberating through the market, as people who bought at or near the peak come to terms with selling at a loss or going through a short sale or foreclosure.

Many agents say they’re seeing fewer short-sale and bank-owned transactions. It’s too early to tell whether that indicates an actual decline in those cases or a backlog as big banks try to clear up their paperwork problems.

California-based Realty-Trac reports that 255 Keys homes were in some stage of foreclosure in the first three months of 2011. That marks a 16 percent decline from the last three months of 2010 and a 48 percent decline from the same quarter a year earlier.

Broker Brian Schmitt is one who believes the peaks of the distressed market are in the past. Specifically, he predicts the number of short sale listings peaked in 2009 and bank-owned properties in 2010.

” Since the end of 2008, the distressed properties have accounted for a disproportionate number of sales, ” Schmitt says. And by disproportionate, he means a quarter of the listings and nearly half of the sales in the fourth quarter of 2010.

So far this year, however, he says short sales and foreclosures have been 16 percent of the listings and 34 percent of the sales. If those numbers continue to shrink, they’ll have less influence on the market when it comes to pricing and psychology.

There’s a lot of talk nationally about shadow inventory — waves of distressed properties that have yet to hit the market for a variety of reasons.

” I’m sure there’s a shadow inventory. I know there are people who are renting and waiting for a better market, ” Schmitt said. ” But I just don’t have a sense that there’s a shadow inventory of foreclosed properties. I think a lot of it’s been flushed out. ”

Sales were off to a particularly robust start in the Upper Keys, with a 55 percent year-to-year bump. That’s been good news for Florida Title’s Debi Wachendorfer, who has handled twice as many closings so far this year, with no sign of a slowdown.

Susan Recarey of Marr Properties in Key Largo points out that while sales are up, prices are still down. But she’s not sure how much longer that will be the case, as ” the low prices are being absorbed. ”

Schmitt expects it will be a while before the Keys has the kind of low listing numbers — inventory — that will translate into steadily rising prices. And says it’s unlikely that we’ll see a return to anything like the peak for a very long time.

Cash is still king — no matter the price, agents say. Interest rates are low, but high-dollar loan amounts aren’t easy to come by.

Today’s Keys are a mix of locals, snowbirds, second-home buyers and investors. ” Our traditional buyer was priced out of the market, ” Schmitt says. ” People want to buy this lifestyle, and they can afford it again. ”

By KAREN QUIST

The Sale‐Price‐to‐Original‐List‐Price (SP/OLP) rose +1% to 72.06% from 71.37% on June 30, 2009. More importantly, the current ratio increased from 62.49% at the beginning of 2010. The SP/OLP 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 that ultimately closed was written, and provides a measure of the mismatch between the initial list price of many Sellers and the market price acceptable to Buyers.

The average Sale‐Price‐to‐Final‐List‐Price (SP/FLP) of sold properties rose 4 full percentage points to 91.12% at the end of June 2010 from 87.10% at the endof 2009 where it has steadily been for the past 3 years. It is a very significant indicator of market health and balance. The margin for negotiating sales price dropped overall from about 13% to less than 9%, which signifies a growing recognition that prices are near bottom. The margin in April 2009 was the low at84.83%, the high was 95.99% in January of 2004, the year that set the record for sales sides with 7,020. The SP/FLP compares the Sale Price to the List Price at the time the property goes under contract. This figure shows the actual percent of reduction, on average, that buyers and sellers can expect from the list price of a property correctly priced for its amenities, condition and location.

March 2010 sales exceeded the number for every March since 2006. February and January sales exceeded sales in that month dating from 2007. The number of properties for sale at the end of March was -25% less than the record of 5,084 properties in March 2007, with an overall trend showing a continual reduction in inventory compared to the same month in past years. All positive signs for our market here locally.

Countywide sales in the first three months of this year increased 28 percent over the fourth quarter of last year, and 34 percent over the first quarter of 2009.

The average sales price for the first quarter of 2010 was 14 percent lower than in the same three months of 2009, averaging $417,000 in the Keys, the report shows.

Local real estate agents point to lower prices combined with low interest rates and the first-time home-buyer tax credit for helping to boost home sales numbers.

People that were “priced-out” of the market in the real estate boom are now realizing that this may be a great time to buy since interest rates are low.

Some segments of the market, specifically homes prices under $250,000, have started to stabilize because of increased competition among buyers.

There are some great buying opportunities throughout the keys. Much like the third and fourth quarters of 2009, which saw some of the best gains since 2004 and 2005, local families are flocking to the market hoping to take advantage of the opportunity to buy while it still exists.

However, the Key West Association of Realtors released a report last week stating that the average sales price of both Key West homes and condominiums in the month of March alone showed gains over March 2009, indicating that the market in Key West is stabilizing faster than other areas of the Keys.

The Middle Keys had the greatest increase in the number of sales, nearly doubling in the first quarter of 2010 the number from the first quarter of 2009.. The Middle Keys also had the smallest decline in average sales price at only 2 percent during the same time period.

The Lower Keys had the smallest gain in the number of sales in the first quarter of 2010 over 2009 at 6 percent, but it saw the largest decline in prices, dropping 25 percent.

The Keys also have experienced a notable decline in the number of listings and months of inventory. The first three months of 2009 showed about 4,500 properties for sale throughout the county, compared with 3,800 as of March 31, 2010. Months of inventory dropped from 46 months at this time last year to 28 months currently.

All market areas had a minimum of 10 percent fewer properties for sale at the end of the first quarter of 2010, with Keys West declining by 22 percent to 1,091, down from 1,406 in 2009 and a peak of 1,588 in 2008.