Sunday, October 24, 2010
I thought it would be interesting to review the luxury condo market in Cocoa Beach and Cape Canaveral as it stands in the last quarter of 2010. Some of my comments from one year ago about the same market segment are here. For my number-crunch, I chose the poster child of successful sales in a crappy market, the beautiful Meridian of Cocoa Beach pictured above. This complex was built and marketed by an experienced long-time developer in our area who has built 21 complexes in Cocoa Beach and Cape Canaveral since 1977. They were able to sell their last remaining unit out of 64 in December 2009 about two and a half years since the first unit closed, a remarkable feat in a horrible market while every other developer was floundering with few or no sales. Of the strategies they employed to sell their units, in addition to "decorator credits" paid back to buyers, they offered jacked-up commissions to buyers' agents. Of the last 13 developer units sold, all paid either 4% or 5% to the buyers' agents. A $30,000 plus potential payday is enough to set most agent's tails a wagging. This strategy along with exorbitant bonuses was employed by other developers in our area as the market tanked boosting buyers' brokers paydays on some sales over the $50,000 mark. For the record, I have always thought bribing buyer's agents a smelly practice and have commented frequently about it on this blog.
We have seen five total resales at the Meridian (all between $550,000 and $575,000). One other unit is under contract at the present, a short sale asking $500,000. The first resale happened in January 2008 just 17 months after it's purchase for $150,000 more than the short sale price of $550,000. The developer was able to move the remaining 13 unsold units after this short sale closed although by mid 2009 they were starting to drop prices of similar units below $550,000 in order to exit the project. The second resale happened a year and a half later in August 2009 and, although not a short sale, sold for over $100,000 less than the purchase price two years earlier. The last three resales all closed this year. None were short sales but all represented over $100,000 loss to each of the sellers.
As of this morning, October 24, there are six units offered for sale and one short sale under contract . Two of the six are asking slightly more than they paid (cuckoo) and the other four are asking below their purchase price, one more than $200,000 less. What are we to conclude from our research? To me, it seems that there will be more price drops in this complex and very likely more short sales. Excluding the resales, only four owners bought for less than $575,000, the highest of the resale prices. That means that there is likely a considerable number of underwater owners who have been blindsided by the resale prices since the developer's departure. How long do they hang on looking at a six-figure paper loss with fingers crossed hoping for a turnaround?
There is a level at which these units will sell and the market seems comfortable with the recent low to mid $500,000 range for the interior units although it's conceivable that it could inch lower. None of the corners have resold. We saw immediate sales recently at Ocean Paradise in south Cocoa Beach when the developer dropped prices significantly on the unsold units there and I expect, at or near the current lower asking prices, that the building should sell the remaining units. Buyers who have been waiting for deals on luxury condominium units have now and in the near future opportunities to be rewarded for their patience. There are other new luxury buildings with similar dynamics where deals have already been and will be happening as reality becomes manifest. There are two pending short sales at Sol y Mar for less than $450,000. These units sold as high as $900,000 four years ago. As units at Michelina have been offered in the high $400s and low to mid $500s recently they have sold.
Inventory of $500,000 plus units stands at 44 right now, half that of early 2009. Some of that is due to asking prices drifting below the half million dollar mark but a significant part of the reduction is because of sales. Meanwhile, the October weather continues to be perfect. I encourage beach time. The ocean water is at 80 degrees and the mullet run is still on and the beaches are deserted with the exception of the beach behind Coconuts where the annual Slater Brothers Surf Contest is happening this weekend. The boys were skating the big ramp set up on the beach under the full moon the last two nights.
What we don't know keeps the contracts alive an movin'
They don't gotta burn the books they just remove 'em
___________Rage Against the Machine
Sunday, October 17, 2010
A fisherman stalking flounder at Jetty Park, Port Canaveral one beautiful day last week.
With a lot of media chatter about mortgage rates at another all-time low this week my curiosity got me to wondering how much impact the cheap money was having on our current condo sales. Knowing how stringent requirements for condo loans are at the moment, I didn't expect to see a lot of condo sales involving financing even with 30 year fixed rates below 4.2%. The results confirmed my suspicions. Money may be cheap but, for Florida condo buyers, the series of hoops that the lenders are requiring a buyer to jump through has become a test that is increasingly difficult to pass. The chart below is of mortgage rates since September 2007.
In addition to the most recent month, September 2010, I pulled results for the preceding three Septembers to get a feel for the trend in place. In September 2010 there were 34 total closed MLS-listed condo sales in Cocoa Beach and Cape Canaveral. Of the total, 65% were cash sales. The cash deals were scattered across all price ranges. Looking at September sales in the last four years we find that as mortgage rates were declining the percentage of cash sales was climbing. Much, but not all, of that trend is a reflection of the tightening requirements for condo loans during that time. Back in September 2007 cash sales represented only 21% of the total condo sales in our market. It has been on a steady climb since as the chart below shows.
Taking our same four Septembers and filtering for distressed sales, we find that in 2007 there was not a single short or foreclosure sale of a condo in Cocoa Beach or Cape Canaveral as reported by the MLS. Looking at our chart below of the same metric (percentage of distressed condo sales in September since 2007) we see that that percentage has been on a steady increase with 56% of the 34 sold units in September 2010 being either short sales or foreclosures.
The last stat I pulled up was condo and townhouse inventory in Cocoa Beach and Cape Canaveral in each of the four Septembers. Readers of this blog will know that our inventory has been on a steady decline since 2006 with the present number at a record low, 484 units, 19% either short sales or foreclosures. It is interesting to note that even with distressed sales making up only 19% of total inventory, they made up 56% of the total sales last month. You can draw your own conclusions from that anomaly. If you're thinking of pursuing a short sale, know that of the 9 closed short sales in September, four closed in 2 months or less and five took from four to more than six months to close. Tip; all four of the fast closes indicated in the listing narrative that the sale price was "bank approved".
As always, if you'd like a bulldog, well-informed buyer's agent to represent you in the battle with the often-difficult and uninformed sellers, I'm your man. My goal is to get my clients the best possible deal on the best possible property and, as my posts indicate, I do my homework and know my market and I enjoy it. You can email me at firstname.lastname@example.org
“I don't know what this means. I don't think it means anything.”
Saturday, October 02, 2010
October, my favorite month in Cocoa Beach. We had a two day tropical system that moved out on the last day of September and the sun rose October first on a cloudless, gorgeous day. The storm surf cleaned up overnight and the locals were treated to a day of light offshore winds and classic Cocoa Beach conditions ranging from overhead plus in the morning to chest high perfection as the sun set over the river.
There were 33 condo and townhome sales in the month of September as recorded in the MLS in Cocoa Beach and Cape Canaveral. As always this number will likely creep upwards in the next few days as the ever-tardy listing agents update their sold listings. We had two $500K plus sales in the month, a 1st floor Meridian (actually second floor over the garage) direct ocean, fully furnished 3 bedroom, 2 bath with 2180 square feet and a one car garage that closed for $554,000. It sold just three years ago for $649,900 although that price may have included large concessions by the developer. The Meridian developer was offering significant "decorating credits" to some buyers to prop up the comps as they sold out the project. The other half-million plus sale was, in my opinion, a "smoking deal", a bank-owned 6th floor Ocean Oasis in downtown Cocoa Beach that sold for $535,000 ($162 per square foot). It sold new in 2005 for $935,000. This 6 year old direct ocean unit had 4 bedrooms, 3.5 baths in a spacious 3293 square feet and had a 2 car garage.
September also saw two Stonewood B building units close. One, a NE corner 4th floor, 3/2 with 2170 square feet that closed for $394,500 and a 16th floor, very nicely remodeled 2/2 that sold for $311,500.
A Xanadu 2 story penthouse (16th floor) 2/2 short sale finally closed after being on the market for 666 days. It was in good condition, with 1982 square feet, was furnished and closed for $296,500.
Mystic Vistas in Cape Canaveral was hot in the month with four closed sales from a low of $180,000 to$222,500. Three of the four were short sales and the other was bank-owned.
A four year old Garden Bay direct Banana river first floor, 3 bedroom 3.5 bath with 2350 square feet and a 2 car garage sold for $290,000, a deal in my opinion.
The best one bedroom 2 bath unit in Cape Winds closed for $155,000. This unit was top floor closest to the ocean of the one bedroom units with a sweeping south ocean view. With excellent on-site management in this popular weekly rental complex the buyer has the flexibility of mixing decent rental income with personal use.
A ground floor 3 bedroom 2 bath Harbor Isles lakefront unit closed for $147,500 destroying my bottom call on these units over a year ago. Even my well-developed pessimism was too conservative regarding the decline in this complex. I assumed the amenities, management, and location would insulate this well-run community from the degree of price-retreat we were seeing in other less-desirable complexes. Oh, well. A falling tide does indeed affect all boats.
Of the 33 sold units in September, over half were distressed; 9 bank owned and 9 short sales, a higher rate of distressed sales than we've seen in 2010 as a whole. So far this year there have been 67 closed condo short sales in the two cities and 78 closed bank-owned units out of 355 total closed sales.
Our inventory has dropped below the 5oo unit mark with a total of 492 units this morning although because of end of the month expirations the true number will probably move slightly above 500 in the next few days. There are currently 75 active condo short sales on the MLS and 25 bank-owned units and 76 other distressed sales showing as pending or contingent. Those numbers seem to indicate that the supply of distressed sales is drying up. Time will tell. In the meantime, the mullet run is still on, the north swell is lingering, the sky is cloudless with a slight breath of wind, air temp of 78 degrees and a water temp slightly above 80 degrees, Heaven. I'm out there.
Forget what we're told
Before we get too old
Show me a garden that's bursting into life