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

Mixed Expectations = Mixed Results

The expected slowdown in real estate sales in Cocoa Beach and Cape Canaveral has failed to materialize. In fact activity has picked up and inventory has pulled back. That is not unusual in our market in the spring months but is a little surprising considering the steadily slowing sales and growing inventory since last summer. 

Inventory of condo and townhome units peaked at 148 units a few weeks ago and stands at 135 units for sale this morning in our two cities. A total of 110 units have gone under contract since January 1 so we're moving at a pace of two sold units a day at which our current inventory will last 67 days. 

Sixty one units have closed since the beginning of the year, 64% of them for cash. As mortgage rates have gone up so have the number of cash sales. With the national average 30 year fixed rate mortgage at 6.77% it's a prudent decision for some buyers with savings to use those savings for their purchase. When rates were less than half that it made sense for many to just borrow the cheap money for the purchase. Our percentage of cash sales dropped to just above 50% during those 3% mortgage days.

Of our 61 sold units over half sold in less than a month, 16 of them in a week or less. Median days on market was 21. Twelve units sold at or above original asking price, none of them lasting more than nine days on the market. Of the 23 units that took longer than a month to sell, all but four reduced their price before finding a buyer. Out of the 14 that took over two months to sell, all had reduced their original price and sold for an average discount of 12% to their original asking price.

Fifty of the current 135 units for sale have been for sale for longer than two months, twelve of them without price reductions and three with increased prices. Hope springs eternal but the stats in the previous paragraph would suggest that these sellers will not be finding buyers without coming to terms with their overpricing. A fair number of listings on the market for less than two months are similarly overpriced but haven't been for sale long enough for the market's indifference to sink in. 

There are 24 single family homes for sale in our two cities, a third of them for sale less than a month and a third on market for over six months. The single family home market is more sensitive to mortgage rates than the condo market so I'm guessing the higher rates are responsible for some of this. Only 10 homes have closed since New Years Day with a median selling price of $588,000.

Good luck to those who are hoping to purchase. Know that there are a lot of sellers with unrealistic expectations and try to spend your efforts on those who are priced fairly. There continues to be competition for desirable and fairly-priced properties and multiple offers are still part of the landscape for those properties. Make your offers as clean as possible and know when to walk away. Except for unique properties, there will always be another one.

“If I knew that I was going to live this long, I would have taken worse care of myself.” __John Daly

Optimism vs Reality

There were 33 condos and townhouse that closed in the month of January 2023 in Cocoa Beach and Cape Canaveral. Highest price paid was $760,000 for a 16 year old 3rd floor corner in south Cocoa Beach at Garden by the Sea. It was direct open Banana River and had 2405 square feet with two garage units. At the other end of the scale were eight much older, smaller units that closed below $200,000, all but one of them in Cape Canaveral. 

I don't remember ever having a month in which there were no direct ocean, east-facing units sold. Direct ocean units are the bread and butter of our market and it's surprising to see them missing from the sold list. Highest price per square foot paid were two small units with peeks of the ocean in oceanfront buildings that allow weekly rentals, Royal Mansion and Cape Winds. Both units sold furnished and brought over $500 per sq.ft. Meanwhile, seven of the remaining twelve weekly rental units currently on the market have been for sale for more than 100 days without selling. Only two of them have lowered their price during that time in response to the market's indifference. There is a shared reason for their stubborn optimism.

That reason is the handful of jaw-dropping, high selling prices last year among the weekly rental buildings. Every one of those high sales was a unit with a strong rental history and a stream of future bookings already in place. The new owners closed and assumed the income stream if they stayed with the same management. The stubbornly optimistic weekly units languishing on the market are shooting for similar prices but they lack the rental histories to justify their asking prices. While any comparable unit with similar views and amenities has the same potential for income, buyers are resistant to high asking prices without a solid track record. A unit with $40,000 of rental income last year shouldn't expect to command the same selling price as a similar unit that brought in $100,000. We have not seen this disparity among selling prices of non-rental units in other buildings.

Inventory has increased to 143 units for sale in our two cities. The highest four asking prices per square foot are in weekly rental buildings, all asking over $600 per sq,ft, but only one with a rental history that would justify the price. There are 45 other units asking over $400 per square foot only a few of which I would consider fairly priced at their asking price. Cash sales represented 79% of January's sales. Those who are currently looking to purchase in our market may have a little more leverage than they had last year, at least with the older listings that are over-priced. Note that there are still quite a few sellers who are expecting to get what their neighbor sold their unit for last year even though those prices may not be realistic in February 2023.

Downtown Cocoa Beach has transformed over the last few years with a new fire station, new police station, parking garage and now demolition of City Hall. Around the corner the luxury condos at The Surf on the ocean are approaching completion while next door and across the street existing buildings have been demolished to make way for new structures. There is a new building well underway on the site of the old Barrier Jacks and demolition on the International Palms (the old CB Holiday Inn) has begun. It's a time of change for our little beach town. Oh yeah, the snowbirds are here with all that entails. Welcome back and enjoy.

"When you’re accustomed to privilege, equality feels like oppression."

The Year of Reckoning

Shuttle on the pad in 2011

There are 135 existing MLS-listed condo and townhouse units for sale this morning in Cocoa Beach and Cape Canaveral plus two units at The Surf, the almost-completed, new oceanfront building in downtown Cocoa Beach. New contract activity so far this year has been slower than we enjoyed through most of 2022 with only twenty two units going under contract since Jan. 1. During the same time 35 new condo listings hit the market. Sales activity typically spikes February through April every year so we'll have to wait to see if sales can overtake the flow of new listings during that period. Condo inventory got as low as 34 units for sale last March because of strong sales during that time. Half of the units for sale right now have been on the market for two months or longer including a bunch of weekly rental units that were selling like hot cakes last spring and early summer but have since cooled considerably. The AirBnB investment hysteria of 2022 appears to have lost momentum. 

As condos begin performing their newly mandated structural inspections and reserve studies this year I expect to see an increasing number of new condo listings as the impact becomes apparent. I think that impact will include lower selling prices. That's not a guarantee but higher monthly fees for most condos is almost a certainty. Those who live in older buildings with unaddressed concrete issues would be well-served to be thinking about how much the new structural reserve fund will add to their fees. Concrete restoration is costly and buildings that already have well-funded reserves will not escape the impact of the new reserve accounts. Prospective condo owners should include the possibility of substantially increased fees as part of their purchasing decisions. 

The launch of the Falcon Heavy yesterday evening was spectacular and the two boosters were visible  from separation to landing at the Cape. Next launch is Wednesday morning.

"Tell people what they want to hear and you can be wrong indefinitely without penalty." _Morgan Housel

REMINDER: Condo Registration Due Dec. 31

 All condos in Cocoa Beach and Cape Canaveral with at least one building over two stories must submit their registration to the State by the end of this year, Saturday, December 31. It's very simple and can be done online (link below). Do not miss this first step in compliance with the new legislation passed in July. It is not optional.

• 718.501(3)(a), F.S./Senate Bill SB 4-D requires all condominium and cooperative associations with buildings 3 stories or higher to report the following information to the Division of Florida Condominium, Timeshares and Mobile Homes on or before January 1, 2023.

  • Contact Name, Phone Number, and Email Address
  • Name of Project
  • Project License # ( To find license # please click here)
  • The number of buildings on the condominium property that are three (3) stories or higher in height.
  • The total number of units in all such buildings
  • The addresses of all such buildings.
  • The counties in which all such buildings are located.

  You may provide your association's information to the Division by simply completing and submitting the Building Reporting form below. You may also submit this information via email at: ctmhbuildingreporting@myfloridalicense.com or by USPS mail or hand delivery to:

  Division of Florida Condominiums, Timeshares and Mobile Homes
  Attention: Building Reporting
  2601 Blair Stone Road
  Tallahassee, FL 32399-1030

• "Ever thine. Ever mine. Ever ours." __Ludwig van Beethoven 

What Now?

Here we are at the end of another year and we find ourselves with an uncertain real estate market in Cocoa Beach and Cape Canaveral. A lot has changed in this market since January. Inventory of condos and single family homes is more than double what we began the year with and it's still increasing. Inventory bottomed in March with inventory getting as low as 34 condo units and 10 single family homes for sale in our two cities. This morning we have 127 condos and 25 homes for sale. Condo sales during the first four months of 2022 averaged 73 units per month but slowed abruptly in May just as inventory started rebounding and continued slowing through December. In October we sold exactly half the units we did in October 2021 and that was with twice the inventory.

Mortgage rates rose at the fastest pace in 28 years this year. In January 2022 the national average rate for a 30 year fixed rate mortgage was 3.22%. It was 7.08% the last week of October but has pulled back to 6.31% in last week's survey. A 30 year mortgage at today's rate has a payment that is 43% higher than it was a year ago. A $300,000 mortgage with payments of $1300 that was available in January would be $1858 at today's rate. Add higher taxes, insurance and condo fees, and it begins to affect demand.

Speaking of condo fees, we've seen a wave of condo associations in our area forced to make substantial increases in fees to cover increasing insurance premiums and higher expenses across the board. That trend is still in the first inning. All associations with buildings over two stories in our two cities will have to begin funding the newly mandated structural reserve fund over the next two years after they've performed their inspections and structural reserve studies. The insurance premium inflation that is likely to continue plus that new reserve funding is going to hit hard in many complexes and will force further increases in monthly fees. I expect demand for condos to chill as the higher fees become reality. I also expect today's prices to retreat in response to the lower demand and higher costs. There has not been a lot of discussion about this unpleasant new reality but it is here and must be addressed by the end of 2024. Based on many years dealing with many condo associations I expect a good number of them to ignore this for as long as possible. 

Anyone reading this with a unit in an older building would be well-advised to start thinking about possible inspection findings in their buildings and how that is going to affect them and the value of their unit. Associations can no longer wait until project time to levy a high special assessment to pay for concrete repairs. The new law requires that ongoing contributions to the structural reserve be sufficient to pay for the project at the time it needs to be done. The sooner the engineer says the concrete project needs be done, the higher the increases to fees need to be. 

Sellers of affected condo units (every condo in CB and CC over two stories) will be required to share the structural inspection results with potential buyers or disclose that it hasn't been done yet. As of right now, no disclosure is required but potential buyers need to be aware that today's condo fees whatever they may be are likely going up even in buildings in perfect condition. 

What will our local real estate market look like in 2023? My expectation based on everything I've already mentioned is that demand for condos will continue to cool and prices will begin retracting as the fallout from the new inspection/reserves requirements becomes apparent. This might not happen until the second half of the year if most associations procrastinate on their inspections as I expect them to. Single family homes will continue to be in short supply and I don't think their prices will be as affected as condos although they have their own headwinds in the form of increasing insurance costs and higher mortgage rates. I think 2022 will mark the peak for prices during this cycle. I believe the high selling price for units in some buildings has already happened. 

As always, I could be so far off the mark that I'm shamed into buying all readers a drink in consolation. Offer stands and these predictions will be evaluated next December. Feel free to make your own anonymous predictions in the comments.

Happy Hanukkah, Merry Christmas and Happy New Year, y'all.

“I did not consider, even passingly, that I had a choice when it came to surfing. My enchantment would take me where it would.” __William Finnegan

Breach of Fiduciary Duty. It's Easy.

Half of the current inventory in Cocoa Beach and Cape Canaveral has been on the market for two months or longer. Two thirds of the properties that have received an accepted contract so far in November were on the market less than a month and all but two of the rest had reduced asking price substantially. That suggests to me that new listings are being priced more attractively than the majority that have been sitting on the market since summer and that some of those existing sellers who are dropping their high asking prices are finding buyers.

Deciding on an asking price was fairly simple for the first half of 2022. A seller and their agent could estimate fair market value and add 10 to 20% on top of that and expect multiple offers as soon as the listing hit. That has changed. When the slowdown began in the summer many listings were sitting with optimistic asking prices and didn't notice when contract activity tapered off. Listing agents who were paying attention began tempering sellers' expectations and the ones that adjusted asking prices to the new slowed market were the ones who successfully picked off buyers from the shrinking pool of hopeful purchasers.

With the crazy high rents for next year's snowbird season it's probably reasonable to expect many still unsold condos to pull their listing until after March and rent for the season. The sellers that do this are gambling that their asking prices will be more attractive to buyers late next spring and summer than they are now. What are the chances? Perhaps the stock market will have recovered and cash buyers will be comfortable again with cashing out investments to buy a beach getaway. Perhaps mortgage rates will not be higher than they are now. Perhaps those whose employment was curtailed will have landed in a better position and resume their search for a Florida property. All three of those things have affected the number of prospective buyers of Cocoa Beach properties. Our market is directly tied to these and other macro conditions that we have no control over so, as always, deciding whether to sell or wait is at best an educated guess. 

A suggestion for the handful of sellers who intend to rent to snowbirds while continuing to try to sell their unit: Please let your renters know before they arrive that you will be having agents and their clients coming by to see the unit during their vacation. Best is to arrange a certain day and/or time period for showings so they don't always have to be on call and ready for a visit by strangers. I run into a few pissed-off snowbirds every season who were never told about this in advance and who are rightfully put-out by the inconvenience and who sometimes express their anger by making showings unpleasant. Not optimal for selling.

Deadline Approaching - Condo Board Members Do Not Ignore

The deadline for registration for condos that was mandated in new legislation this summer is approaching. All affected condos (every condo in Cocoa Beach & Cape Canaveral over two stories) must register with the State by December 31 which is just 34 days away. The association then has two years before they must have completed both their milestone inspection and their structural reserve study. The structural reserve study can't be completed without the results of the inspection so associations need to be making arrangements for their inspections soon. The first inspection may trigger a secondary inspection so it would be prudent to build in some wiggle room with scheduling. Structural engineers who will be doing these inspections are going to be very busy the closer we get to the Dec. 31, 2024 deadline. Associations who wait too long to schedule their inspection might find themselves tardy with the reserve study because of it. I would expect it to take several months to schedule and complete the inspections and reserve study. A nice little incentive for condo Board members built into the legislation is that it is a "direct breach of fiduciary duty liability for failure to comply" with this law. Follow this link for the simple registration process. Deadline Dec. 31 this year.

“The sheep will spend its entire life fearing the wolf, only to be eaten by the shepherd.” _unknown

Peak AirBnB. Buzzkill?

Hurricane Nicole pushed a lot of sand around and the dune plants were covered in a thick layer of blown sand after the storm while the actual erosion was minimal. Unfortunately my porch was similarly coated. There have been a few articles written speculating on why Cocoa Beach and Cape Canaveral were spared the erosion both north and south of us. Credit has been given to our periodic beach renourishment. While that certainly helped I think there is another greater factor. 

Every local surfer knows that during big winter north swells the Cape shadows Cape Canaveral and Cocoa Beach from that swell. It can be double-overhead in Satellite Beach while the Pier is waist high at the same time. The north wind and waves as Nicole was approaching that was chewing up oceanfront structures in Volusia County and Satellite Beach was way less impactful in Cocoa Beach because of that shadow and that saved us from damaging erosion. This is not the first time I've seen this phenomenon here.

Having written about the Cocoa Beach real estate market for eighteen years now, I am often asked about my thoughts on the state of the market. Ever-increasing selling prices of properties are usually the main subject of these discussions. People like to mentally tabulate their net worth gains whether they're thinking of selling a property or not. These discussions have increasingly included speculation about a slowdown or pull back and what might be the trigger. I'll take a stab at that.

I believe we have reached and passed the peak in prices for most property types. There are certain unique properties that are less affected by macro market conditions and may continue to appreciate but for most I think we've hit the wall for the current cycle. Condos are certainly not among those unaffected types. Appreciation has been strong since the bottom in prices around 2010. Many condos bought between 2010 and 2015 that sold this year closed for two to three times the purchase price. When I narrow my focus to properties closed in the last six months that were purchased after 2018 I'm seeing examples of as much as 48% annual appreciation. While the annualized number is remarkably high, the bulk of those gains accumulated during the crazy runup in prices this year. The high prices are what prompted many of these sellers to sell even though they only purchased a year or two ago.

It's not surprising to see properties bought a decade ago during the post-crash bottom sell for three times the purchase price but it is concerning to see properties bought less than two years ago sell for almost double the purchase price. Weekly rental condos have been among the most rapidly appreciating types. There has been quite a lot of media attention this year alluding to the wealth to be made owning vacation rental properties. While short-term rentals can generate quite strong cash flows, the reality is that those who paid this year's prices and who must hire management will be netting quite a bit less than the get-rich podcasts may have promised. I think we'll look back on 2022 as peak AirBnB. Earlier this year there were feeding frenzies of buyers with every new vacation rental listing. Multiple offers first day on the market were expected and most units sold over asking price. We had multiple sales of weekly units without garages closing for over $700 per square foot. These prices are unjustifiable in my opinion. We saw short-term rental rates skyrocket during the pandemic and while they may remain at these elevated levels, I don't see much room for increases. The increased competition in our area has taken away rental pricing power and reduced occupancy for all but the most desirable properties. New owners are finding that a nice but not great unit is not enjoying the same occupancy the rental history may have showed and the 20% to 35% short-term management fee is taking a big bite out of what does come in. We have yet to feel the impact of the new structural inspection and reserve requirements as well as the expected increases in master wind and flood policies. These will force increases in condo fees which will be substantial for some older complexes. The vacation rental condos are predominately cash deals so fortunately higher mortgage rates have not had much impact on them.

The prospective buyers for other types of condos and single family homes are, however, affected by those much higher mortgage rates and are facing similar uncertainty about insurance. Many have decided to call off their search and wait to see what happens. A smaller pool of buyers is not positive for prices. Those buyers who feel that they may have missed their opportunity may get a shot in the coming months and years at lower prices if they are willing to make peace with the uncertainty of overhead moving forward. 

And that is my Debbie Downer evaluation of the state of the Cocoa Beach and Cape Canaveral real estate market in November of 2022. Perhaps next year I will be proven wrong. I would welcome that. Wherever the prices go, Cocoa Beach remains a special place in Florida and we were reminded early this morning of one of our unique attractions when we were finally rewarded with the launch of Artemis 1 around 1:30 AM. It was a beauty as it ascended towards a bright half moon hanging over the ocean welcoming the Orion spacecraft on it's first lunar visit. We are headed back to the moon after a long break.

"Ever notice that people who have an hour to waste usually try to spend it with someone who does not?" - Bernard Meltzer