Friday, April 13, 2012

Low and outside - batter walks

 April 13, 2009, three years ago today. Seems like just yesterday. Apple stock closed that day for $123, up an amazing 50% in just three months. I put in a stink bid for $110 hoping to score in the pullback that was sure to come. In the period from March 1, 2009 through April 13, 2009 there were 12 closed MLS listed direct ocean condos in Cocoa Beach and Cape Canaveral. I thought I'd compare the same time period in the following years. The difference in prices paid for these types of units has not been as extreme as I expected before doing my research.

March 1 through April 13

2009 - 12 units closed - High $/square foot $286 (new Meridian corner)
___________________Low $/square foot $158 (foreclosed Almar)
___________________Average $/sq. foot $214

2010 -  8 units closed - High $/square foot $253 (Cape Winds corner)
___________________Low $/square foot $122 (foreclosed Ocean Club)
___________________Average $/sq. foot $216

2011 -  9 units closed - High $/square foot $272 (Michelina)
___________________Low $/square foot $163 (short sale Las Palmas)
___________________Average $/sq. foot $213

2012 - 12 units closed - High $/square foot $272 (new Ocean Cove)
___________________Low $/square foot $108 (ground floor La Mer)
___________________Average $/sq. foot $191

In April 2009 our total MLS-listed condo and townhome inventory in Cocoa Beach and Cape Canaveral was at 700 units with 36% (just over 250) of those distressed (short sales or foreclosures). Our inventory this morning is less than half that at 346 total units for sale with 15% (52 units) of those distressed. In the three years being discussed our inventory has been halved and the number of available distressed sales has been reduced by 80%. Those buyers who've been waiting for that screaming deal foreclosure or short sale have a much smaller pool of possibilities and greater competition from others who have found themselves in the same position.

Take away: The days of expecting to score with a crazy lowball offer are, for the most part, behind us. For buyers hoping to purchase a condo, there are still some very nice units at very attractive prices, just fewer than in the recent past. I would advise offering a fair price in line with recent comps if you find something you like. Throwing unsupportable lowball offers is a recipe for frustration. By the way, Apple closed yesterday at $622. I'm still waiting for my $110 order to be filled.

"Did you ever feel like a plastic bag,
drifting through the wind, 
wanting to start again?"
________Katy Perry


  1. Apple shares will sink--just like home prices.The stock is overpriced just like property values.

    Throw in the European markets and stocks sink even more. Throw in forthcoming foreclosures and home values drop accordingly. It is what it is.I'm still waiting to buy that condo at the right price.

  2. You think my $110 order will get filled? It's good till canceled. Of course if Apple gets back to $110 we're probably looking at a whole bunch of other problems bigger than a gadget maker's stock price.

    When you say right price, I'm assuming you mean 20% less than whatever current value is at the time. Is $150,000 still too much for a Mystic Vistas unit? $100K? $50K??? How will you identify the market bottom?

  3. Part #2 of the current wisdom goes something like this----
    Upper Class will always be just that--upper class" Unless we can tax the tar out of them" they are the buyers of those Mystic Vistas units. Define them as "A"
    Lets define Middle Class as the letter "B" and anyone lower as "C".So instead of trying to bring population "C" up to the level of "B" we do just the reverse and bring "B" down to the level of "C"-- Soooooooooooooooo now "B" is not in the financial position to enter the property markets at current market prices.So--the answer to "identify the market bottom" is clear--when "C" becomes the level of income needed to purchase, the bottom will be found and price will be dictated by that low tide.Your $110 order is about $350 off the mark. The markets have to fall to reflect price of all venues. I must add---if I had purchased property a couple years ago I would be upside down by a big chunk of change.Glad I followed my convictions.

  4. Sorry. I can't understand what you're saying there. Any chance you can dumb it down for me?

  5. I have to think that Inflation,A Stagnant Economy and the end result---A lower standard of living--looms in our future. The very laws of economics have been disregarded.An artificial boom and the appearance of prosperity is subject to the laws of nature.Collapse is the end result of years of failed policy.We can only portray the Three Wise Monkeys of Nippon "Speak,See and Hear no evil" for so long.At some point honest appraisal must be accepted. Hope that clears thinks up.

  6. Okay, if you think inflation "looms in our future", you are making a case that it would be wise to buy South Cocoa Beach property now before prices go higher. It really appears that you are complaining because you can't find property at the low prices you want to pay. Larry has reported the falling inventory (supply) and a growing number of would be buyers (demand). Again, if my understanding of economics is correct, that should lead to stabilized prices at best but more likely rising prices. For my two cents, you missed market bottom and I would be surprised if you see the 2006-2011 situation repeat itself.

  7. You only read what you wanted to reprimand me for.Had you comprehended what I stated it would be clear that inflation by itself is not the factor that screams buy. "A stagnate economy and a lower standard of living"is in fact what pierces the ear drum.Stating your theory pertaining to my inability to reasonably buy at the perceived bottom is your right. Just as it is my right to doubt your understanding of economics.No stabilization is on the horizon and I in fact would reevaluate your two cents.BUT---I do respect your opinion.

  8. Larry,

    Looking at your numbers, it seems inventory is down but prices are still falling. Average $/square foot is down 10 percent year over year, small sample size noted. Am I misreading the numbers?

  9. Small samples can be very misleading as can the "average". This is a good subject for a new post, the idea of a "market" that behaves in sync. Our market is more like a bunch of mini-markets (condo complexes) each with it's own set of price-driving dynamics.

    If I look at complexes where there have been high numbers of sales of similar units (like Mystic Vistas or Diplomat) I can come closer to actually determining the trend. In a quick review of sold prices of 750 square foot non-waterfront Diplomat units in the last three years I see that of 5 units sold in 2010 the average $/sf was $111, of 6 sold in 2011 it was $121 and for the 4 closed so far this year the average has been $123. I think that is a large enough sample for us to conclude that prices have been rising since 2010 for Diplomat 2/1 units. Doesn't mean that a unit will sell for less than that but it does give us a definite upward trend.

    At Mystic Vistas the 8 lowest sold prices ever all occurred in 2010 at prices between $130,000 and $155,000. The 9 lowest sales in 2011 were between $170,000 and $190,000. So far in 2012 the lowest sale is $195,000. Now these units are not identical and some have far better views but the trend is clear. Note that 7 of the lowest priced sales in 2010 were in the A and B buildings which historically command the highest prices. The developer's foreclosed units have all been sold and the lowest asking price now is $299,900. The pressure for lower prices at Mystic has been removed. Again, we could have an isolated unit or two pop up as a short sale or foreclosure but the one time event of 20 foreclosed units at once at Mystic forcing all prices drastically lower isn't going to happen again.

    There are other complexes where the trend is still down and others where the number of sales is too low to determine a trend. My take is that, in general, the numbers of distressed offerings are so low that the pressure for lower prices is largely gone. Keep in mind that no one buys the "market" only individual properties. The market direction is instructive but may be at odds with the direction in a specific complex or property type. Look for a new post shortly going into more detail.

  10. Edit - Should read "Doesn't mean that a unit "won't" sell for less than that but it does give us a definite upward trend."

  11. I'm glad you agree with my post on 4/17.You made my point with facts.Though I have to think it's unintentional.

  12. I'd have to understand your post to be able to agree with it. I'm still not sure what you were saying with "bringing population B down to the reverse...level of income needed...low tide". You seemed to say that prices were headed lower when I asked about Mystic but I just showed that Mystic prices have moved up in the last two years. ??

    Want to take another stab at clarifying your position?

    1. I'll move on. We can agree to dis-agree at another time on another subject. It's a informative and fun blog you have.Keep doing what you do.Different points of view are what makes the world go round.

  13. ... "The pressure for lower prices at Mystic has been removed..."

    There are five pending foreclosures in the Seaport Oceanfront (Mystic). There are several HOA dues lawsuits, likely some of which the banks have just not gotten around to foreclosing on, but they will eventually.

    As far as the # of listings in MLS that are actually listed as being bank-owned or short sales - worthless. As I have found more often than not, the owners are so far upside down that they could not possibly be bringing that much cash to the closing table. The only way to know for sure is do a mini title/mortgage search on the property. It has also been reported that banks are instructing their RE agents NOT to indicate it is a distress sale in the MLS.

    Be careful out there and do your research!
    -Local Appraiser

  14. MLS rules now mandate that short sales must be entered as short sales and bank-owned must be indicated as such. Of course, Realtors don't always play by the rules but I've not found any instances in Cape Canaveral or Cocoa Beach where a short sale or foreclosure was listed as non-distressed. A listing agent must select one of the fields below when entering a listing so if they indicate "none of the above" they run the risk of a fine:

    Foreclosure/Bank Owned
    Short Sale
    Relo Co. /Corp Owned
    None of the Above

    Will be interesting to see what any new foreclosures sell for at Mystic. The recent final bunch of the developer's foreclosures all sold for around 20% more than the lowest prices from two years ago. Appreciate the comments.

  15. I know, hard to believe professionals don’t follow the rules!;)

    I found just such an animal in the first project I looked in – the Meridian MLS 584477 went into foreclosure in Nov. 2010. This one is also a good case study in denial until the bitter end – list price is 25% more than the 2007 mortgage.

    Also see that this project is topping the charts of HOA dues at $600/mo – wow.

    Appreciate the reply. – Local Appraiser

  16. That one isn't listed as bank-owned which it's not nor a short sale which it isn't either (at asking price). Denial, definitely. Distressed? Other than the distress of selling for a loss, not.

  17. Ok. I guess our industries use different definitions. That doesn’t fit the legal definition of a market sale – a “willing” buyer & seller, and each party being “typically” motivated. It does appear to fit the definition of distress – seller is under “compulsion” to sell.

    As a buyer, I would certainly want to know if a property is in the throes of foreclosure prior to making a Market Value offer on it. I’ll post a better example when I run into one again.
    -Local Appraiser

  18. When I'm speaking of distressed sales I am talking about short and foreclosed only. Those are the specific metrics that I am able to accurately track. I'm guessing most sales in the last few years have probably involved some distress in the minds of the sellers over money lost.