Monday, May 13, 2019

The Comps Lie


Welcome to lovebug month. May is usually the first big hatch of the year here and it hasn't disappointed. We had almost daily minor hatches for weeks until our first big one last week. The good news for Cocoa Beachlings is that our 35 MPH speed limit is just below the threshold for crushing the little critters, sparing our cars the gooey mess that faster speeds produce. While we were dealing with lovebugs, Denver was dealing with late season snow on the tulips.

Residential real estate activity in Cocoa Beach and Cape Canaveral has been brisk with 70 condo and townhome units and 13 single-family homes closed in the month of April. Condo sales were fairly evenly spread across all price ranges with a median selling price of $250,000. Sixteen units sold for more than $400,000. Sold direct oceanfront units closed in a range of $250 to $354 per square foot with only completely remodeled or new units with garages commanding over $300 per foot. For perspective, there are currently 34 optimistic sellers asking over $300 per foot for their units, the majority of which are certain not to receive anything close to their crazy asking prices. The intense competition for listings continues to nudge asking prices further into the silly realm. A listing agent  willing to list a property for considerably more than the comps can justify is not doing her client a favor although by accepting the overpriced listing she is keeping it out of the competition's hands. Keeping the listings and sales numbers high on Zillow is imperative for the high volume agents and teams. The same statistic-driven marketing encourages listing agents to cancel and relist properties in order to keep their average days on market artificially low. Many MLS statistics have become so massaged that they can no longer be trusted. Selling price as a percentage of asking price, days on market, concessions and who actually sold or listed the property are routinely misrepresented. When pulling comps, I must research the listing history and sometimes call the agent in order to determine the actual facts of a sale.

Example: Condos are often sold furnished. The MLS offers a listing agent a choice of "full", "partial" or "optional/negotiable" as regards furniture and furnishings. I have yet to see a listing agent specify in the concession comments of a closed sale whether the "optional/negotiable" furnishings were included or not. Several tens of thousands of dollars worth of furnishings that were included in the final sale but not noted on the closed listing makes that sale a misleading comp. Similarly, paying for the furniture outside the contract makes the recorded sales price misleading if the original listing noted furnishings as "full". If either or both of the agents involved in the deal accept less than the posted commission amount the comp is likewise tainted. I am aware of a sale in which the seller received a free two week stay in the unit every year after closing for life. That certainly makes the selling price unreliable as a comp.

Buyers and sellers of real estate need to keep in mind that the details on the comps they and their agents are using are very often incomplete and sometimes deliberately inaccurate. Appraisers know this and often call participating agents asking for details about closed transactions. Similar calls from agents are practically nonexistent. I assume most are taking the comps at face value. I know better.

What is going on with the traffic light at Brevard and Minutemen Cswy? Anyone?

Golfers, do not take the lightning threat lightly. Last week lightning struck the flag stick on number six on the River course and printed a beautiful big image of lightning into the grass of the green. It could have been on of us.

"I’m doing this intermittent fasting thing where I don’t eat for 45 minutes after each meal." ______Josh Brown

Tuesday, April 23, 2019

Between Snowbirds and Summer

Crowds in south Cocoa Beach watching the SpaceX Falcon Heavy launch a couple of weeks ago. All three boosters successfully landed back on Earth, two on land and one on the drone ship offshore. The rocket on the drone ship was subsequently lost when it toppled overboard in high seas on the return to Port Canaveral. This was my first time seeing the returning rockets as they made their high altitude burns setting up for vertical landings side by side at the Cape. Both rockets were safely on the ground before the twin sonic booms arrived. This whole rocket business never gets old.

Easter 2019 is behind us as we slide into the brief slow season between the snowbirds and summer vacationers. Our supply of condo units for sale stands at 276 units this morning in Cocoa Beach and Cape Canaveral. Sales have been brisk so far in April with 56 units reported as closed so far in the month. We ended March with 71 units closed so, at our current burn rate, we have about a 14 week supply of condo units in our two cities. That helps explain the frequent incidence of multiple offers we're seeing. Demand still exceeds supply.

Single home inventory stands at 62 currently for sale with 27 sold since March 1 so a similar demand/supply imbalance exists there as well. It is imperative that buyers, whether they are looking at condos or single-family homes, talk to their lenders before they start looking at properties. A short delay getting a pre-approval letter could mean losing a desirable property to a more well-prepared buyer. Cash buyers are obviously in a stronger position.

Sellers, please check your MLS listing for inaccuracies and omissions. The condo listings in the MLS without the condo name entered are probably missing showings. It doesn't matter whether the listing agent made a mistake or doesn't know how to enter that info. A missed showing is a potential missed sale. Also, those who elected to go with a MLS entry-only listing to save money may want to reconsider whether the language in the agent remarks stating that "the buyer or buyer's agent will pay a $XXX fee to listing broker at closing" is an enticement or a hindrance. My vote is hindrance.

The ocean water in Cocoa Beach has been Caribbean clear for the last two weeks and is as beautiful as it gets. The Banana River is clear as well after a prolonged period of turbid water. Traffic is noticeably lighter now that Easter has passed and the business golf league has started back up for the year at the Cocoa Beach Country Club. Everyone is invited to join us as we play nine holes every Tuesday, tee times anytime between 12 noon and dark. Skins and closest to the hole prizes for those that want to participate. Join us.

I'm gonna soak up the sun, While it's still free, I'm gonna soak up the sun, Before it goes out on me.” ___Cheryl Crow

Monday, April 01, 2019

Into the Serengeti

It's that time again. Unlike the wildebeest waiting for the first rains, our mass migration starts on the same day every year, April Fools Day. The first and largest group staged during the night and with loaded SUVs began the river crossings on their northward migration early this morning. Stragglers will follow over the next few weeks but the herd's first big push is always on this day, April 1, when a large number of winter leases expire. With a late Easter this year, we can expect a few more weeks of medium activity with a crescendo the weekend of the Easter Surf Festival and then, crickets until school lets out for the year. It's a bittersweet time. I've said goodbye again to friends that I won't see until next winter. While we all look forward to greatly reduced traffic, restaurants and bars will see less revenue and many condo owners, especially those in buildings with three month or longer rental minimums, won't be receiving any rent checks possibly until next season. The Cocoa Beach golf course will become less crowded, the pace of play will speed up and summer prices will take effect. Those who can should consider visiting Cocoa Beach in May. It's one of the least crowded times of the year and rental prices are less (for most places).

Real estate sales activity isn't as affected and usually stays steady through the end of summer even though there are less people around between now and June. Our sales in March picked up considerably after a slow start to the year and we had a total of 68 condo units and 17 single family homes closed during the month, exceeding last March by a good margin.

Inventory continues to creep upward. We have 272 condo and townhome units and 69 single family homes for sale today in Cocoa Beach and Cape Canaveral. Even with the increased supply, supply is still tight for certain property types. Those looking for a direct ocean unit above the ground floor with at least two bedrooms for less than $350,000 have two possibilities. Need three bedrooms with same criteria? There are none unless we increase the budget to $400,000 in which case we have six. As always, it pays to have reasonable expectations and to know "about" what your target property should be worth. Know that most everything is overpriced.

Confused love bugs have been hatching every day for the last week but I've not seen any hooking up. I don't know if this means we can expect a record hatch in May or if the early hatches will short circuit the May hatch. Time will tell.

"It makes sense to dance while the music is playing." __G. Maynard Krebs

Sunday, March 17, 2019

Watch Your Step

Here we are in the busiest month of the year for the Cocoa Beach area; the most traffic, most visitors and, usually, the busiest time for real estate sales. As I mentioned a few weeks ago, sales have been slower than what we usually experience during snowbird season. That trend continues. There appears to be no one reason for the slowdown other than somewhat optimistic pricing for residential property. It's certainly not for lack of real estate agents. I don't remember any other time when there were more agents working this small market, not even during the money-on-trees years of the mid-2000s. Visitors would be well advised to lower their voices when discussing a property search in public lest they be tackled by multiple nearby agents which will probably include their server and bartender. I'm starting to think that Uber requires a real estate license to become a driver given the number of real estate business cards I've been given during a ride.

The February numbers are in and it was a decent month despite being slower than last year. There were 43 total condo and townhome units closed in the month in Cocoa Beach and Cape Canaveral. Direct ocean units sold ranged from $239 per square foot for a nicely updated 2nd floor Majestic Seas 2/2 to $337 per square foot for a 2nd floor 3/2 Artesia in Cape Canaveral. Median price paid for direct ocean in February was $294 per square foot. Note that the price per square foot is an inaccurate gauge and is useful only as a starting point for comparison. Those units that can command selling prices over $290 per square foot are usually remodeled and/or newer with garages and furnished.

There were 12 single family homes closed in the month, all in Cocoa Beach. Prices ranged form $1.26 MM for a direct ocean Cocoa Beach 4/3 to $315,000 for an updated 1763 sq ft 4/2 a few blocks from the beach. A three quarters of the home purchasers used mortgages while half the condos were purchased for cash.

Inventory is better than just a few months ago with 266 existing condos and 72 single family homes available this morning in our two cities. A third of the homes and 20% of the condos have been for sale for six months or longer. We know what that likely means, overpriced.

There are several new restaurants in downtown Cocoa Beach since my last list that I've not had the opportunity to visit. The 4th Street Filling Station is getting good reviews as is Luna. I'll try to do an updated list as soon as the snow has melted. Stay tuned.

"Only put off until tomorrow what you are willing to die having left undone." __Pablo Picasso

Monday, February 25, 2019

What Happened?

From January 1 through February 25 last year, a total of 98 condo and townhome units were closed in Cocoa Beach and Cape Canaveral. In the same period this year, we have closed 67. That's a surprising  slowdown considering that we began 2018 with an inventory of just 173 existing condo units for sale in our two cities but are sitting on 263 units for sale this morning, an increase of more than 50% in a year's time. 

What happened? My best guess is that sellers' expectations have gotten ahead of buyers' appetites. I've commented often in the last few years about the prevalence of overpriced listings and it appears that trend is dampening sales. Over a quarter of the current inventory has been for sale for over 180 days, many of them cancelled and relisted multiple times to appear fresh. If a listing agent is doing this, there's a good chance the property is overpriced. In fact, it's probably prudent for buyers to approach all listings as likely to be overpriced. 

At the risk of sounding like a broken record, buyers need to know the range of fair value of the properties that they are targeting for purchase. Neither the Zillow Zestimate nor the Property Appraiser's "market value" can be trusted to be close to accurate. Only a comparison of recent sales of comparable properties, adjusted for differences can be trusted to indicate the neighborhood of current value. As a side note, there is no trustworthy way to determine exact value, only a range. Any good buyer's agent can determine the fair range. If you can't trust your agent's opinion of fair value, you have the wrong agent.

Hope everyone has been enjoying the early summer weather while most of the nation has been experiencing crazy low temps and heavy snowfalls. Our trees and flowers like the hibiscus pictured have begun blooming early in response to the early warming. Some trees are sprouting new leaves even as last years old leaves continue to fall. No complaints here.

During the same time that sales were lagging here on the Space Coast, the little engine that could, the Mars Opportunity rover, received its last command from Earth. It was launched from Cape Canaveral Air Force Station in 2003. NASA engineers had sent over 1000 commands trying to reestablish contact after a major Martian sandstorm broke Earth contact with Opportunity last June. Designed to last just 90 Martian days and travel 1,100 yards (1,000 meters), Opportunity vastly surpassed all expectations in its endurance, scientific value and longevity. In addition to exceeding its life expectancy by 60 times, the rover traveled more than 28 miles (45 kilometers) by the time it reached its most appropriate final resting spot on Mars – Perseverance Valley.

"My battery is low and it's getting dark." __last message received from Opportunity as the sandstorm moved in and covered the solar panels

Thursday, January 31, 2019

It's Local and It's Different

Someone questioned why the statistics I reported in the previous post were so different than what they'd read elsewhere. The stats and trends presented on this blog are and always have been Cocoa Beach and Cape Canaveral specific and are almost always at odds with overall Brevard County stats. We've seen in the past that a housing crisis in Palm Bay may not even be felt in Cocoa Beach. Numbers reported by our MLS and repeated by news media and other real estate sites are for the county as a whole and don't present a clear picture of the individual markets within the county. The disparity was especially true during the Great Money Evaporation event of 2008-2009 and the subsequent recovery years. The trends and statistics of real estate activity in Cocoa Beach and Cape Canaveral will never mirror Brevard County as a whole.

In Cocoa Beach and Cape Canaveral there are four times as many condo and townhome units for sale as single family homes. In the county as a whole that proportion is reversed with three times as many homes as condos for sale. That difference makes the county statistics misleading for those only interested in the beach market. Readers can continue to expect only the Cocoa Beach and Cape Canaveral market conditions here.

Inventory has ticked up through the month of January. There are currently 265 existing condo and townhome units and 64 single family homes for sale as reported by the Cocoa Beach MLS. Note that my inventory number doesn't include units in proposed projects offered as pre-construction reservations of which there are thirteen today.

Random observations at the end of the first month of the new year;
Initial asking prices are becoming more ludicrous. Sellers have always had optimistic opinions on the value of their properties but that optimism has reached new heights in our market. A listing agent who wants to sell a property knows that accurate pricing is paramount but with the crazy increase in number of agents pursuing listings in our market most have adopted the strategy of taking a listing at whatever price the seller wants in order to get the listing. They know there's a good chance the seller will moderate their expectations after the market has failed to deliver a buyer in a reasonable time and may eventually lower the price enough to close a deal. Even if they don't it is another page on Zillow that will draw inquiries that can then be sold something else that is priced fairly.

A quarter of the units closed in the last 60 days sold in the first week on the market. Obviously they were priced right. Another quarter of those closed sales took from five to fourteen months to sell, all but one with multiple price changes along the way. Obviously overpriced. Buyers, you better have an agent who can recognize which properties are priced fairly and which are not. A buyer who chooses to deal directly with the listing agent needs to have the skills necessary to determine the fair number or odds are good that they will overpay for one of the majority of listings that are way over-priced. A 10% discount isn't a good deal on a property that is 25% over-priced.

The competition to stand out on Zillow has become fierce as have the tactics by agents to boost their numbers there. The transaction numbers, reviews and ratings can't be trusted and it's gotten worse. A seller might contact Josh Altman to list their property because his transaction numbers are so high but find themselves stuck with Mikey because Josh can't possibly handle fifty listings and, frankly, has other more important listings that deserve his direct involvement. The good news is that Josh will agree to the seller's crazy high asking price because it will give him another listing on Zillow to attract more inquiries. When Mikey closes your sale there's a good chance that Josh will get the credit which will help him boost his numbers and chances of getting the next inquiry. It keeps Mikey busy and Josh in Maseratis.

As I write this there is a 77 degree difference in the temp in Cocoa Beach and Chicago. 63 here, -14 there. It's not just the fishing and beaches that have made Florida so crowded. I'm thinking it might get worse.

I have squandered my resistance
For a pocket full of mumbles, such are promises
All lies and jests
Still a man hears what he wants to hear
And disregards the rest

__________________________Paul Simon

Friday, January 04, 2019

New Year, Same As The Old Year

This beautiful orchid decided to bloom again for Christmas and New Years. It's more beautiful than the picture reveals and its two neighboring orchids are about to follow.

We begin a new year in Cocoa Beach with about the same residential inventory and rate of sales we began last year with. The same supply/demand imbalance persists as well. It seems reasonable to expect most trends that we saw in 2018 to continue.

We began 2019 with 238 existing units for sale in our two cities. That's after a year in which we closed over 734 units. That's a 17 week supply at the average sales rate of the last twelve months. We would run out of supply by Easter without new listings. In addition, a large portion of the current inventory is overpriced, evidenced in part by the large number of listings on the market longer than six months and the high number of listings whose agents are repeatedly cancelling and relisting trying to trick the MLS days-on-market clock. It's still amazing to me that agents think that deceiving buyers with artificially low days on market will somehow sell an overpriced listing. If it ain't selling, it's the price, people.

While we're on the subject of prices let me share some observations about offers. I've prepared and received many hundreds of offers over the years and I've seen quite a few that never stood a chance of success, a large number recently. Beginning negotiations on a positive note helps and price and terms of the very first offer set the tone. Regardless of commentary to the contrary, emotions are a real part of most real estate transactions. We have humans on both sides so it's reasonable to expect human reactions and emotions. Assuming a property is priced within the range of what the data suggest is fair market value, an offer reasonably near that range will usually be received by a seller as a constructive beginning. An offer way below that fair range is usually received with negativity and little to no optimism that a deal will be possible. Constructive optimism or adversarial negativity. That first offer determines the tone of the negotiations and often has an impact on final terms. Anyone making a crazy low offer should be prepared to have to start over at a higher number when they receive no counter from a discouraged seller. Another thing; I have presented enough low offers to know that if one part of an offer is unattractive the other parts better be compelling if there is to be hope for a deal. An offer far below asking might be considered if it's cash, with a quick close. Might. An offer with a close more than 45 days in the future, contingent upon a mortgage or even worse, the sale of another property, better be close to the seller's wished-for selling price to stand a chance of consideration. Buyers who are compelled to offer low should consider the attractiveness of the terms and make them as shiny as possible if they hope to have any chance of success. New, overpriced listing might need a little seasoning time on the market before an unrealistic seller will consider reasonable offers.

Fifty two percent of MLS-listed condos and townhomes sold for cash in 2018 in Cocoa Beach and Cape Canaveral. Remember that when the next expert predicts that rising interest rates will kill the real estate market. Interest rates were not a consideration for over half of condo purchasers in our market last year.

Those of you hoping to purchase in Cocoa Beach or Cape Canaveral in 2019 should be aware of the low inventory and the preponderance of overpriced listings. It will help to have a good idea what type of property you want (and whether it is even reasonable in this market) and be able to act quickly when something matching that idea appears. You and your agent need the ability to estimate current fair value and you need the resolve to resist your urge to make a lowball offer "just in case". With our supply/demand imbalance no seller needs to sell below market value. The fact that an offer is cash is unlikely to entice a seller to sell cheap when over half of all buyers are paying cash. Despite everything, barring some outside force or event, we can reasonably expect the current sales rate of over 14 condo units and 3 houses per week in our two cities to continue. Good luck out there and feel free to contact me if you have any real estate related questions. Happy and rewarding New Year.

"She says, like, literally, music is the air she breathes...
I wonder if she even knows what that word means,
well, it's literally not that." __Josh Tillman