Rising Tide of Inventory

Inventory of homes and condos for sale in Cocoa Beach and Cape Canaveral continues to increase. There are a total of 176 condos and townhomes and thirty single family homes for sale in the two cities. The median days on market for the current inventory of condos is at two months. Considering that over 80% of the condos closed so far in July sold in the first four weeks on market it seems that the majority of the current inventory is probably overpriced. There is less indication of widespread overpricing among single family homes with median days on market of current inventory at 39 days. 

Cash continues to dominate the condo market with 70% of the closed condo sales in July going for cash. I expect the over-priced listings to continue to languish while fairly priced new listings pick off the buyers. Anyone with a condo listing older than four weeks is advised to look at recently sold prices of comparable units and to adjust their expectations and asking price accordingly. Buyer mania has cooled and hoping to set a record selling price is not producing results for those who are still trying except for those few with extraordinary properties. Realistically priced units are selling.

"I would exercise caution with pre-construction condos and be aggressive (low) with offers. We have shifted from a seller's market to a buyer's market in high-end condos in a very short time." __Larry - March 4, 2005

Does This Make My Butt Look Big?

(This is a repeat of a post from 2009 that is still relevant today. As I've mentioned in recent posts, there are condos that will not satisfy any lender's requirements regardless the loan officer's eager optimism and buyers and their agents may be wasting their time looking at them.)  

Does this make my butt look big? Everyone knows there is only one correct answer to this question no matter who is doing the asking. There is another popular question that also has but one answer. That question is one that is posed to loan officers and mortgage brokers every day, "Do you foresee any issues with my getting a loan on this property?" Day one in loan officer school the class is asked this question and then instructed to shout in unison, "No, not at all." over and over until the phrase is firmly imprinted on their brains. Then, when "the question" is posed by an actual borrower, the neuro lingual programming takes over without any conscious thought and "the answer" comes forth confidently. Doesn't matter that the Florida condo that the borrower is asking about is 1800 miles away from the lender's office or that the last Florida condo loan that the loan officer did was in 2006. "We can do it" he says with a confident smile. Right. He can do it until he can't and that usually doesn't becomes evident until well down the road towards closing.

All borrowers who are buying a Florida condo would be well advised to talk to a lender in the market in which they are purchasing. There are issues with Florida condo loans that lenders will not encounter anywhere else. A great credit score and previous relationship with a distant lender might not be enough when the hurdles to closing start appearing. A good local lender who is active in our market will have knowledge about Florida-specific loan issues and will likely have encountered many of the sure-to-happen problems with previous loans. That knowledge allows him to be proactive rather than reactive in addressing these issues. Anticipating and working to solve an issue before it presents itself can be the difference in making a closing date or not.

Disclaimer: I'm not saying out-of-area lenders can't close deals here. It happens all the time, but, from plenty of personal experience, I can say without hesitation that the odds of having problems are increased when the lender is not local. Just don't expect a loan officer to admit that his performance out of state may be compromised by lack of local experience. Remember the NLP "answer" from class. I can close deals and represent buyers anywhere in the state of Florida but I don't venture outside my market because I can't do the best possible job for my client in a market I don't know. Greed and false confidence encourages many realtors and lenders to venture out onto the thin ice, often to their client's detriment. Be skeptical when yours fearlessly claims proficiency in an unknown market.

You may leave here for four days in space

But when you return it's the same old place

The pounding of the drums, the pride and disgrace

You can bury your dead but don't leave a trace

Hate your next door neighbor but don't forget to say grace 

___________Barry McGuire - Eve of Destruction, 1964

Mortgage Failure

Check out the honeybee swarm I saw on a palm tree at the Cocoa Beach Golf Course a few days ago. They were all gone two days later.

I read a startling comment today from a Florida lender who said that in South Florida, "less than 10% of loans submitted for full condo review will receive condo approval & close." I've seen my share of rejected condo loans but that number surprised me. Those applying for a condo mortgage will hear about the condo questionnaire but may not fully appreciate the root canal that getting one completed can be. Florida conventional condo mortgages have their own separate qualifying guidelines that are set by Fannie Mae and Freddie Mac and the initial steps in getting a condo loan approval includes having the condo association complete the dreaded condo questionnaire. There are two forms of this document depending on the amount of down payment being made, full condo review as mentioned in the opening sentence and the limited review which a higher down payment can allow. To qualify for a limited review, the unit must be purchased as a primary residence or 2nd home and typically requires 30% down payment although there are ways around this. Investor units do not qualify for limited review. Things that matter and can lead to a loan denial with a a full review that don't matter with a limited review are association financials including reserves, percentage of owner residents and percentage of units past due among other things.

The reviews have always been quite thorough and, earlier this year, became even more so with the addition of questions about building condition and existence of safety concerns. The vague nature of the new questions has led to some associations refusing to complete questionnaires for fear of exposing themselves to liability. There are questions that start with "Is the association aware of..." and "Is it anticipated that...". I can understand the reluctance to sign one's name to a question like this. Here is a more in-depth look at this growing trend of refusing to complete the questionnaire from the Orange County Register (CA). There are a few associations in our market that already refuse to fill out the questionnaire effectively making the units there cash-only. 

Buyers hoping to buy a Florida condo who plan to use a mortgage to purchase need to discuss with their buyer's agent their down payment percentage and whether the purchase is for residence or investment so the agent can avoid units in buildings that won't be able to satisfy the underwriters. Becoming familiar with the requirements on the Florida condo full review will help educate buyers and agents alike about what criteria are critical to approval. Here's a copy of the Fannie Mae full review questionnaire that a buyer's lender is going to want answered by the association. Save a lot of time and effort by avoiding condos that can't satisfactorily answer these questions or be prepared to put 30% down to downgrade to the limited review or pay cash.

"A debate between an expert and a crank does nothing other than elevate the crank." _Mehdi Hasan 

Increased Supply

The king surveys his kingdom

Inventory has been steadily creeping up since the end of snowbird season. The number of condo units for sale in Cocoa Beach and Cape Canaveral was around 135 units the first four months of the year but has since crept steadily upward and this morning stands at 164 units for sale. A little over a year ago in April of 2022 our inventory bottomed at 34 total condo units and a mere 12 single family homes for sale in our two cities. 

Sales activity remains steady although with pockets of softening in selling prices in some condo complexes. There were 58 closed sales in the month of May at a median price of $385,000. Out of 58 units, 35 closed for over $300 per square foot with ten of those bringing over $400 per foot. Two thirds of them sold for cash. Time on the market has increased with the median of 25 days on market for those closed in May. So far in June, 19 units have received an accepted contract.

Single family home activity is strong although supply remains scarce. Four single-family homes have received contracts so far this month with one of them selling for full asking of $1.225MM first day on the market.. Selling prices for homes likewise remains very strong with 13 of the 28 homes for sale asking over $1MM and three of those over $2MM. 

We are just now starting to see a few local condos beginning their milestone inspections which must be completed by the end of 2024 along with the subsequent structural reserve study. Agents are now required to provide the milestone inspection results and structural reserve study to buyers if requested. I would advise prospective buyers of Florida condos to ask for these documents. Be aware that very few condos have done these yet but as we move through the rest of this year and into next, they will become available. The results of both could change a buyer's mind about purchasing a unit. The structural reserve study will determine how much money needs to be raised for repairs that the milestone inspection recommended and by what date. For some older buildings in need of repairs soon, the increase to monthly fees could easily double or triple the current fee. Well-maintained buildings with no existing concrete issues will be among those least affected. Older buildings with obvious concrete damage will not. Caveat emptor.

"If you’re easily offended, you’re easily manipulated.” _unknown

How Much is Too Much?

I was reading an article in the Tampa Bay Times about the startling new flood insurance increases and was looking at their posted chart (left) when I noticed the zip code at the top of the chart, 32931. What is this, surely a typo or a mistake? 

[Click the chart for a larger image.]

The new rates that were announced this week put Cocoa Beach in the number one position as getting the highest increase of any zip code in Florida. Those with existing flood policies have a little breathing room as premium increases are capped at 18% per year for them but those buying a new flood policy will see the full rate at purchase. This new Risk Rating 2.0 as FEMA calls it went into effect in April and the intent is to price policies based on actual risk. Many Floridians have gotten away with unrealistically low flood premiums in the past but that era has ended. 

The reported increase for new national flood policies for affected properties in Cocoa Beach is 761%. Flood policies in Cocoa Beach that were less than $1000 before this year will now cost over $6000 a year on average. Note that flood insurance is typically only required by lenders for homes that are in an at-risk zone, which is a minority of homes in Cocoa Beach. Those looking to buy a home here need to check for flood zone status of the properties they're considering and to include the cost of flood coverage if they're buying in a flood zone. Note that these increases are for federal flood insurance only and don't affect regular homeowners and wind coverage rates which are set by the insurance companies. Properties in at risk zones will typically be required to carry flood coverage by their mortgage holders as are those with homeowners' policies from Citizens which now requires all policy holders to also have flood coverage.

You can search for flood zone status for specific addresses in Brevard County at the County's Flood Map below.

Current Effective Brevard County Flood Zone Map

A good summary from the Tampa Bay Times here who also posted the chart above.

"Experience is making the same mistake over and over again, only with greater confidence." _unknown

Mini Slow Season

May is traditionally one of our two slowest months for real estate in Cocoa Beach and Cape Canaveral, the other being October. Sales remained strong in April as properties contracted earlier during the spring season closed while inventory remained practically unchanged. 

During April there were 76 closed residential properties, 63 condos and townhomes and 13 single family homes. Lowest price paid for a single family home was $535,000 for a 2965 square foot 5/3 in Cape Canaveral that needed some TLC. Median price was $810,00 with five sales over a million and the top dollar sale was a beautifully remodeled direct oceanfront two story in south Cocoa Beach with 3670 sq ft with six bedrooms and 4½ baths and a pool that closed for $3.17 million. 

Median selling price for condos was $385,000. Lowest selling price in the month was $75,000 for a tiny studio in Cape Canaveral far from the beach. Highest selling price for condos was $950,000 for a gorgeously remodeled and fully furnished 5th floor corner direct ocean Crescent Beach Club in south Cocoa Beach. It is a 3/2 with 2278 square feet and a single garage. Slightly over half of the condo sales were cash and median time on market was 24 days. More than a thrid of the sold units were on the market less than two weeks.

Selling prices remain high with eleven condos bringing over $400 per square foot although prices have declined in several popular complexes. Notably, among the weekly rental complexes, a Sandcastles 2nd floor 2/2 side unit closed for $515,000 while a 7th floor Canaveral Towers 2/2 sold for $550,000. My vote for most notable sale of the month was a remodeled and furnished 5th floor direct ocean Royale Towers Sand Dollar 2/2 that closed for $655,000 or $476/sq ft. That's a remarkable price for a unit in a complex with a two month minimum rental restriction. More remarkable prices are happening at The Diplomat in Cocoa Beach where 60 year old, 2/1 units with no garage and no ocean view have closed over the $300,000 mark.

Activity seems equally spread over all price ranges both waterfront and not. Buyers are still active and attractive units in good buildings are still commanding high prices and selling quickly. We usually see activity increasing as we enter the summer months and with the current inventory levels multiple offers will likely continue to happen with attractive new listings. Buyers paying with cash will continue to win most of these multiple offer situations. Good luck to all hoping to purchase. Make your offers as clean as possible with as few contingencies as you are comfortable with for your best chance at success. Those looking for a deal are likely to be disappointed.

Florida, among six other eastern states, just recorded the hottest January through April season ever experienced. I can confirm that the heat is here in Cocoa Beach. What is not here is the much-hyped "super blob" of seaweed that the media has been warning us about. It may eventually arrive or it may pass by in the Gulf Stream if it doesn't coincide with easterly winds as it passes. We get sargassum on our beaches every year and always have. Some years it is so thick that the beaches are covered and you have to wade through a pile just to get to the water. Some years there is very little. It's always passing by in the Gulf Stream during summer but it needs sustained easterly winds to get onto our beaches. Beaches in the Yucatan are dealing with piles of it now and our turn may come. It's a natural thing and something that most see as little more than a temporary nuisance. It will disappear like it always has. For those walking the beach when the seaweed is washing ashore, take the time to pick up small pieces at the water's edge and shake them out over the sand. You might be surprised at the creatures that fall out that ride with it, shrimp, crabs and an occasional sea horse among others. 

Congrats to all graduates. Enjoy your summer as you get ready for the next stage of your lives. Best of luck to you all.

“If you aim at nothing, you’ll hit it every time.” _Butch Harmon

In-Between Season

There are only two houses for sale in Cocoa Beach and Cape Canaveral asking less than a half million dollars. Median asking price of the 25 houses for sale in the two cities is over $800,000. Of the 134 condos and townhouses currently for sale only 11 are asking less than $200,000. Median asking price is $440,000 with 46 units asking over a half million.

Thirty units have closed so far in April, seven of those bringing over $400 per square foot and another eleven over $300/sq ft. Shocking high selling price of the bunch was a 5th floor, furnished, direct ocean Royale Towers 2/2 Sand Dollar unit that closed for $655,000 or $476/sq ft. The three vacation rental units closed so far this month brought an average $404/ sq ft, none of them direct ocean, east facing units. Prices for vacation rental units have pulled back from last summer's levels with lower closing prices in three of our biggest vacation rental buildings. Many of the units still for sale in these buildings have asking prices that are completely out of sync with recent selling prices. Those hoping to buy a vacation rental unit would be well-served by knowing the prices of recent sales. They are considerably lower than the same units were selling for last summer. 

Speaking of asking prices, over half of the units closed so far in April were on the market less than 30 days. Of the 134 units still for sale over half have been on the market longer than that with 53 of them for sale longer than 60 days. That seems to suggest widespread overpricing. Buyers, know the comps, and don't overpay just because the seller is out of touch. Make the case for your offer with recently sold comparable properties and if the seller refuses to acknowledge reality, move on to one who is open to reason. The sellers who are pricing correctly are the ones selling. The optimistic bunch will continue to stagnate on the MLS until the reality check comes.

The bulk of the snowbirds have departed and traffic, other than the air show traffic this past weekend, has returned to its more leisurely off-season pace. From now until June is one of our two good-weather, no-crowd seasons. The other is Labor Day until Thanksgiving barring a hurricane. Things will heat up again as schools begin letting out for summer in late May and our summer vacationers start arriving.

"Twitter is such a mess, it’s as if they drove a clown car into a gold mine..." _Mark Zuckerberg

Peak Season

My corn plant, Dracaena fragrans, bloomed again this winter for the third or fourth time in over 25 years. The sweet scent of these blooms, which open a few every night for about a week, confirms the Latin name. There is never a clue from year to year whether this one will be a blooming year. It's always a December surprise and a welcome one.

Halfway through March and the real estate market in Cocoa Beach and Cape Canaveral is quite active with 42 condo units receiving an accepted contract so far in the month. Half of the units getting a contract had been on the market for over 45 days, all but three of them with reduced prices, most of those reductions substantial. What this tells me is that sellers are starting to realize that last year's high prices aren't working and they are dropping prices to attract buyers and it's working. Only two of the contracted units in March that had been on the market for less than 45 days had reduced prices. This supports the idea that priced-right properties will sell quickly in most cases. 

There are 137 existing condo and townhouse units for sale this morning in Cocoa Beach and Cape Canaveral. Half have been on the market longer than 45 days. There are 22 existing single family homes for sale in our two cities. Two thirds of them have been on the market longer than 45 days. So far in March seven homes have received an accepted contract. That means we currently have about a two month supply at the current sales rate. New listings for all residential property types seems to be matching the sales rate keeping inventory numbers relative stable, although low.

For those hoping to purchase, there is still competition and multiple offers have not gone away especially for desirable properties. Selling prices in several condo complexes have pulled back from last year's high numbers and that trend seems persistent so there is a nugget of hope for prospective buyers. We have yet to see any impact from the looming inspections, structural reserves and reserve study requirements but it is getting closer. Stay tuned. 

Those visiting our area during March, which is our peak season, may have a distorted view of what life is like here. There is a convergence of spring breakers, baseball teams and snowbirds that makes March the busiest, craziest, most crowded month of the year for us. After Easter we revert to our much more sedate normal pace. I would encourage those who have only visited during the spring to return at some other time to get a more balanced picture of what Cocoa Beach is really like. On second thought, please take my word for it. No need to waste a trip here just to see us during slow season. Cheers.

“It says here in this history book that luckily, the good guys have won every single time. What are the odds?” -Norm MacDonald