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Key West, Florida is one of those prime tourist destinations where many wealthy people have purchased vacation homes. For years, home prices on the island were sky high and workers in the town's service economy struggled to find affordable places to live. The collapse of the housing market have brought prices back to earth, and as NPR's Greg Allen reports, at least temporarily, has created opportunities for some long-term residents.

GREG ALLEN: John Creighton has lived in Key West for 25 years and works two jobs as a personal trainer and as a server in a restaurant. It wasn't until last year, however, he was finally able to get something he's long wanted: a single-family home in Key West.

Mr. JOHN CREIGHTON (Personal Trainer, Server): It's a three-bedroom, three-bath. We got a nice, open area kitchen, looks off onto the pool, into the patio, bright yellow. It used to be, oh, a deep orange coral. It was...

ALLEN: The house needed work. It was a foreclosure that had been neglected. Dealing with the bank wasn't easy, but in the end, Creighton says he got a bargain paying just $300,000.

Mr. CREIGHTON: The last person who bought the house paid $400,000 more than I did - $402,000 more than I did.

ALLEN: It's not an unusual story here in Key West. After years of being priced out of the market, teachers, taxi drivers, bank tellers and members of the military stationed at the Navy base here are finding houses and condos they can afford to buy.

Ms. KAREN LANE (Realtor): And I think it's probably a third of the buyers in our market are people just like John.

ALLEN: Karen Lane is a Key West Realtor who helped Creighton and his partner buy their home. She says the low prices, combined with low interest rates, and a gradually growing economy, have begun to heat up the housing market here.

Ms. LANE: Once something gets into this price range, I mean, there was multiple offers that were coming in on the property and it was touch-and-go there for a while. I mean, it was not...

Mr. CREIGHTON: Oh...

(Soundbite of laughter)

ALLEN: Home sales are double now from what they were last year, and prices are beginning to rise. To see what's happening in Key West's real estate market, there may be no better place than in the passenger's seat of Realtor Donna Windle's electric car.

Ms. DONNA WINDLE (Realtor): Old Town is the first end of the island. Duval Street's about a mile long and the historic district is about a half a mile wide.

ALLEN: Key Westers call the architecture in their historic district conch houses, named for the shellfish that is an island specialty. They're wooden homes, often with second-story galleries and gingerbread decorations. Many are brightly colored with well-tended gardens. Others have clearly seen better days.

This is the Key West visitors know and where the housing demand is greatest. Big historic properties here still are priced in the millions. But Windle says it's nothing like it was just five years ago.

Ms. WINDLE: Our market dropped about 60 percent across the board. That's a good working number to look at.

ALLEN: Unfortunately, Windle says, the drop in prices hasn't made buying a home easy for everyone. Many of the bargains here are homes that need work, and that can make financing difficult for a first-time homebuyer.

Ms. WINDLE: When you have the high loan-to-value ratio in other words, where your borrowing may be 97 percent or 95 percent or something like that, the lender knows you don't have 10 grand to replace that roof next year, or whatever it is that comes along.

ALLEN: The lack of affordable housing is a problem in many urban areas, but it's especially acute in so-called paradise communities resort areas where the demand for housing is high and the supply is constrained by geography.

In those places, homeownership isn't necessarily the answer. Bob Calhoun, with Habitat for Humanity in Key West, takes me to the group's newest project.

Mr. BOB CALHOUN (Habitat for Humanity): As you can see, this was originally two separate buildings.

ALLEN: These are former Navy officer quarters, now being rehabbed into 11 apartments - affordably priced rentals. It's a relatively new idea for Habitat helping people rent, not own but one that makes sense in a high-demand market like Key West. Calhoun says Habitat's other rentals are full and have long waiting lists.

Mr. CALHOUN: We have everything from wait staff, people running the tours, from running charter boats to law enforcement officers and young professionals.

ALLEN: Calhoun says the housing collapse has enabled Habitat to buy buildings, a few years ago, it couldn't consider. The group's now looking at other properties in Key West it may be able to convert into affordable rentals.

Greg Allen, NPR News, Miami.

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