Hands Up and Kick the Checkbook Over Slowly

A one-week move of over a half percentage point in mortgage rates caught everyone's attention this week, especially prospective mortgage borrowers. Freddie Mac reported that the average 30 year fixed rate mortgage increased from 3.93% to 4.46% between June 20 and June 27. That's on top of a similar increase already pressuring mortgage applicants since May 2 when the average rate was 3.35%. In the real world that translates to a monthly payment today for a $250,000 mortgage that's $159 higher than just seven weeks ago. A borrower getting a $250,000 mortgage at today's average rate will pay $1908.000 a year more interest than a borrower of the same amount at the average rate in early May.

Will rates continue their upward trend? No one knows but opinions are abundant. I would normally say do your homework and trust your gut but, in this case, the forces moving rates are too big and complex for a peasant like me to comprehend. Time will tell. In the meantime, inventory of condos and townhomes in Cocoa Beach and Cape Canaveral is back down to 275 total units after briefly getting to 330 units earlier in the year. Median asking price is $210,000. Distressed sales make up 9% of those 275 units with only three of the distressed units asking over $200,000.A total of 52 units (12 distressed) are recorded as having closed in June. At that rate we have but a 5.29 month supply of units for sale.

There are 59 single family homes currently for sale in our two cities with a median asking price of $350,000. Only five are distressed with the highest asking price of the five at $289,900. Nine single family homes are showing as having closed in the month of June. None were distressed.

We are firmly in our usual summer pattern of afternoon thunderstorms and calm ocean waters. Temps have not been unbearably warm and the fishing has been good. As is always the case in summertime, the Cocoa Beach Country Club golf course is wide open, uncrowded and cheap. Tee times unnecessary. We haven't had decent sized waves for a while but there has been a constant small background swell keeping the kids and longboarders satisfied. I'll see you outside. Stay hydrated and don't forget the sunscreen.

Short Sale Negotiators on Acid

I promised I'd share the final chapter in the crazy short sale story I began earlier this year when it finally concluded. As crazy as it was then it got even more bizarre before blowing up in spectacular fashion this week. The story of the short sale on acid is now complete and follows. I'll start back at the beginning for those who may have missed it.

The short sale one bedroom, one bath Cocoa Beach condo was first listed on April 27, 2012 for $49,999. The seller signed a contract on May 4 but that buyer backed out three weeks later. The seller signed another offer for $35,000 from my client on July 7 and the signed offer was submitted to Wells Fargo to start the short sale approval process. Wells finally approved the short sale at the $35,000 contract price with a $2000 seller contribution and release from deficiency in January this year. The contract was then submitted to the condo association for first right of refusal and an existing owner took the contract away from my client. The bank refused to transfer the approval to the new buyer and the short sale negotiations had to be restarted. At this point I suggested to the new buyer that the approved price might not happen again and if it didn't then all the other owners would lose. She was willing to take the risk for them (without asking them, of course) and would not back away and let the first buyer close.

The title company negotiating the short sale resubmitted the new contract and the bank responded in April with a new, increased approved price of $51,500 with $7000 seller contribution. The new buyer responded by upping their $35,000 to $35,100. The bank responded with a request for the buyer's highest and best offer accompanied by three recently sold comparable properties. The buyer provided comps and upped their offer to $37,000. This was April 24.

Wells Fargo responded this week with their take it or leave it offer. They now want $63,000 from the buyer and want the seller to sign a promissory note for $131, 828 payable at $1098.57 per month for 120 months. In other words, Wells Fargo today wants $157,828 more than they were willing to accept five months ago. Is anyone surprised that these guys needed bailing out because of bad decisions?

Here's the easy to read timeline:
April 27, 2012 - condo listed as short sale for $49,999
May 4, 2012 - seller signs contract for unknown amount
May 30, 2012 - buyer cancels contract and listing returns active
July 7, 2012 - 2nd buyer submits offer of $35,000 and seller signs
July 9, 2012 - short sale package is submitted to Wells Fargo
Jan. 21, 2013 - bank approves sale for $35,000 plus $2000 from seller, no deficiency
Jan. 22, 2013 - another owners declares intent to exercise first right of refusal
Feb 5, 2013 - bank refuses to transfer approval to new buyer
Feb 8, 2013 - short sale process is started over with new buyer
April 12, 2013 - bank counters at $51,5000 plus $7000 seller contribution
April 15, 2013 - buyer counters at $35,100
April 23, 2013 - bank declines counter and asks for best plus 3 supporting comps
April 24, 2013 - buyer submits best offer of $37,000
June 10, 2013 - bank counters at $63,000 plus $131, 828 promissory note from seller
June 12, 2013 - buyer declines and file is closed - foreclosure next

Current market value of this unit is around $40,000 to $45,000. I will update on the sold amount when it is eventually foreclosed and sold. Wells Fargo stock is currently rated either buy or strong buy by 18 major analysts. I'm an idiot.

"Insane in da membrane.
Crazy insane, got no brain
Insane in da brain."  ___Cypress Hill

Parsing the Trends For Summer 2013

Let's look at the dynamics of the Cocoa Beach real estate market as we begin the summer of 2013. I'm not seeing any significant shifts away from the trends that were already in place. The most powerful force in our market is the continued decline in the number of distressed sales. Of the 61 condo sales recorded in May 2013 only 16% were distressed. We began the year with 44% of all MLS closed condo sales in January 2013 either short or foreclosed. That percentage has dropped every month since. As these distressed sales have disappeared the downward pressure on prices has disappeared with them and we are seeing rising prices again in almost all complexes and neighborhoods. The sellers who were waiting for market recovery to list their property are finally getting their day although probably not as fast as they hoped. Prices aren't rising nearly fast enough. Our depleted inventory still has a large number of listings at optimistic asking prices by these hopeful sellers. That means that, after discarding the over-priced listings, buyers have very few priced-right attractive properties to consider. That dynamic has the fairly-priced, good ones moving quickly. Price a decent condition Cocoa Beach property near the fair market value and it will sell immediately.

One third of the condo sales in May were on the market for less than 32 days and half of the single family homes sold in less than 35 days. Had the other sellers been more realistic with their first asking price that number would be higher. 59% of  condo sellers had to reduce their asking prices before finding a buyer.

The number of purchases with mortgages is rising. As recently as 2010 two thirds of all condo purchases were for cash. In May we were right at 50/50 cash to mortgage for condos and about 2/3 of all single family sales were financed.

As we move through the summer months I expect these trends to continue. For sellers it means that you can reasonably expect to get more than you would have last year but not a great deal. For buyers, expect competition from other buyers for good properties and expect to pay slightly more than you would have six months ago. Thinking of throwing out a lowball on a good property hoping for a steal? Try some other market. It's not going to happen here. Get pre-approved with your local lender so you can include a pre-approval letter with your offer or have proof of funds if you offer cash. As always, good luck in your search. Questions? Email me at larry@walkerbagwell.com or call me at 321.917.5786 I'm happy to help.

Here's the tl;dr version for those with limited attention spans.

Cocoa Beach & Cape Canaveral Real Estate Trends Summer 2013

• very low inventory
• slowly, steadily rising prices
• shrinking number of distressed sales
• competittion among buyers for good properties
• quick sales of good, priced-right properties
• mortgages becoming more prevalent
• successful lowball offers = DOA

"Money doesn't solve all your problems but it solves your money problems."  __James Altucher