Winding Down 2023

Shuttle Atlantis cooling down on the runway after it's return from ISS twelve years ago.

It's been a busy year for residential real estate in Cocoa Beach and Cape Canaveral although total closed sales are lagging 2022's numbers. Last year we had a total of 684 closed condo units. As of this morning, two days before Christmas 2023, there have been 541 closed condo and townhome sales in the two cities so far in 2023. Inventory stands at 244 units for sale. Median closed price was $370,000 and 61% of the sales were cash deals and 23% of closed units sold in the first 7 days on the market. Median days on market for the current inventory is 70 days.

Single family home sales were robust in the year with 122 homes closed so far. Median sold price was $744,000 and cash buyers represented 40% of the closed sales with 23% sold in the first 7 days on market. Median days on market for the sold properties was 35 days and is 67 days for the current inventory of 29 homes and two pre-construction offerings. Median asking price of the current inventory is $1,2000,000.

Highest price condo to sell this year was a stunning 45 year old, 8th floor direct ocean penthouse at Beach Winds downtown Cocoa Beach that closed for $2 MM. The completely and tastefully remodeled unit had 4560 square feet, 5 bedrooms, 4.5 baths and two garages. Twelve units closed for a million dollars or more in ten different buildings, all but one of them in Cocoa Beach.

Highest selling price for a single family home was $4.2 MM for a two story, six year old, direct ocean home in downtown Cocoa Beach. This 5 bedroom, 4.5 bath beauty sold just three years ago for $2.3 MM. Thirty four homes closed during the year for a million dollars or more with five of those selling for over $2 million. Of the 34, all but two were in Cocoa Beach.

Mortgage rates declined again this week and we are currently over a point lower on the 30 year fixed rate than we were in October. Average national rate for a 30 year fixed this week is 7.06%. Whether this pullback in rates is enough to get undecided buyers off the fence is anyone's guess. Selling prices in several condos have retreated from the peaks earlier this year but a lot of current listings are still asking close to those peak prices with indifference from the market so far. We'll get a sense of what the new year might bring by mid-February when the snowbird season will have cranked up in earnest. The effect on buyers of recent and pending substantial increases in condo fees has yet to be revealed. I will be reporting and commenting on this as those effects become apparent next year.

Best wishes to all for the coming year and hopes for a hearty, happy and drama-free holiday season. Don't forget the Surfing Santas Christmas Eve morning behind Coconuts at the end of Minutemen Cswy. Activities begin at 7:30 and the Santas hit the water en masse at 10. Be there or be square. elDubya out for 2023.

"It appears my hypocrisy knows no bounds." _Val Kilmer in Tombstone

A Deep Dive On Condo Fees

 After blathering on for over a year now about coming condo fee increases I see that we've had enough movement among  the Cocoa Beach and Cape Canaveral condo complexes to have a look at some actual numbers and see where we stand in the condo fee inflation story. Note that the majority of these increases do not yet reflect funding for the newly required structural reserve fund. Condos have until the end of 2024 to come into compliance so there will be a lot more fee increases throughout next year as associations get their milestone inspections and reserve studies completed. Many of the recent fee increases we've seen were triggered by radically increased insurance costs alone.

I pulled these numbers from currently for sale MLS-listed units that had changed hands in recent years and with recent fee increases. This is but a small, random sampling among the 241 current condo listings.  There are plenty of others with similar increases that don't happen to have a unit currently for sale in the complex. The data I'm quoting came from agent input so, as always, I'm at the mercy of the accuracy of that input. Some of these complexes like Villages of Seaport have different fees for different sized units so I'm quoting the fee history for a specific unit that is currently listed for sale. There might be some errors but I believe we can trust the overall trend. All these numbers are publicly available.

• Cocoa Beach Club - 2022 fees - $525/month * 2023 fees $860/month
• Royal Mansion - 2019 - $355/month * 2023 fees - $594/month
• Xanadu - 2021 fees - $575/month * 2022 fees - $675 * 2023 fees - $950/month
• Canaveral Towers - 2021 fees - $550/month * 2022 - $650 * 2023 - $1085/month
• Windward East - 2018 fees - $415/month * 2023 - $638/month
• Windrush - 2021 fees - $470/month * 2023- $665/month
• Villages of Seaport - 2019 fees - $360/month * 2023 fees - $760/month
• Emerald Seas - 2016 fees - $470/month * 2022 - $640/month * 2023 - $940/month

Owners in several of the complexes listed above had the additional burden of special assessments during the period when the fees were climbing. Many of these and others not listed will be forced to raise fees again when the results of their structural reserve studies are completed. 

2024 looks to be a year of reckoning for our condo market. So far, prices have not really reacted in a meaningful or measurable way to this year's fee increases but there have been no sales in several of the of the affected complexes since the last fee increase. Is it the typical year-end slow market or is the market waiting on sellers to compensate for the new, higher fees with new, lower asking prices? Perhaps buyers will shrug off higher costs of ownership as an acceptable issue and will continue to pay higher and higher prices for the limited number of condos available in our area. Maybe rents can be raised enough to cover the fee increases for investor-owned units. That seems unlikely to me but it won't be the first time our market has fooled me. By the end of 2024 and possibly as soon as the end of snowbird season we will know. In the interim I think it's reasonable to expect the inventory of condo units for sale to continue to increase as the higher costs of ownership sink in. I expect post-snowbird listings next spring to be plentiful. 

You have 16 days left in which to procure your gifts. Use them wisely. 

"One of the most frightening things about your true nerd, for many people, is not that he's socially inept - because everybody's been there - but rather his complete lack of embarrassment about it." _Neal Stephenson

Slowdown or Breather Before the Next Runup?

 

Tranquil moonrise in South Cocoa Beach.

Real estate sales activity in November was slow as is historically typical for the month. There were eleven closed single family homes in Cocoa Beach and Cape Canaveral in the month and 29 condos and townhomes. Median days on market has increased with closed condos at 35 days on market and 75 days for single family homes. Median price for closed condos was $400,000 and $1,020,000 for single family homes. Cash sales represented just less than half of single family home sales and 72% of sold condos.

New contracts were slow as well with only 26 new condo contracts during the month and thirteen new SF home contracts. As with the closed sales, the new contracts on homes during the month were concentrated in the higher-priced properties while condo contracts were more plentiful in the lower priced properties.

Inventory this morning stands at 240 condo units and townhomes for sale in the two cities and 32 single family homes. There is only one home for sale asking less than a half million. Median asking price for the condos is $397,000. Over a third of the condos have been on market for over 100 days. Median DOM for the entire condo inventory is at 68 days which is much higher than earlier in the year. All signs point toward a slowing market but, and it's a big but, this is always a slow time of year. Our market generally blasts off after New Years so we'll have to wait and see if the slowdown is seasonal or systemic. We have several well-known headwinds like rising insurance costs, rising condo fees and higher mortgage rates so it's anyone's guess whether we will be back off to the races come January. 

High today for Cocoa Beach, December 4, 2023 is 79° F with light winds. Very few snowbirds have arrived yet and visible human activity around town is minimal. I can feel the beach exerting a strong pull right now and I'm guessing others are feeling it as well. It's advisable to enjoy this last quiet period before Christmas if one isn't fond of crowds.

"It's hard to accept the truth when the lies were exactly what you wanted to hear." __unknown

What's Up With Condo Fees?

It's been quite a year for Florida property owners. The good news; a slow hurricane year. The bad news; insurance. The stories about wildly increasing homeowner's insurance premiums have been circulating since policy renewals began arriving earlier in the year. I started saving comments about rate increases from various internet forums where Florida homeowners were discussing insurance increases. Here are the most recent quotes I've saved. I have many others.

• Ours went from $2500 in 2018 to $6500 this year
• $4,600 this year up from close to $4,000 last year. A few miles from the coast Volusia County
• In Central Florida, it jumped from $1100 last year to $2500 this year
• In Land O Lakes, went from $1800 to $3900 per year 
• Up from $3,000 to $8,673. What do I win?
• Ours went from $1800 in 2020 to $5000 now
• From $4.3K to $8.4K. 30 miles inland. Roof replaced in '23. It was $1.3k back 4 years ago.
• My beach town house that was built in the ‘30s and has never had a claim went from $8000 to $22,000.
• We were $1600 for years… last year, $3600… this year, $6000. Orlando not near water
• $3300 in 2016, $6,000 2023 high and dry St Pete.
• $4500 to $9700
• Mine went up 50%. From $4,000 to over $6,000. 100 miles inland, ten year old metal roof, 1750 sq ft. That was with Castle Key,
• I just received a homeowner's insurance bill for $17,000!!! Last year it was $8000 and the year before $4000!
• We jumped 55% this year, 225% in the past four years. 

The drastic insurance increases hit condominiums hard as well with many local associations getting six figure increases in their master policy premiums. With a balanced condo budget in place, an unexpected six figure expense requires either a special assessment or, if ongoing like annual policy premiums, an increase in fees to cover it. Not every association has gotten their renewal yet and not all those who have, have figured out how they're going to pay for the increase yet. Some have done a combo special assessment and a fee increase to cover both the increased insurance cost and compliance with the newly required structural reserves. We'll continue to see both as associations come into compliance by the end of next year.

Those that haven't been keeping up with condo fees might be a little surprised how high fees have gotten. Of the current inventory of condos for sale, over 16% have monthly fees of $800 or more with several over $1000. Some of them have not done their structural reserve study yet which in almost all cases will require even higher fees. Deadline is December 31, 2024. Prospective condo buyers need to read recent meeting minutes to see if fee increases are being discussed and also need to know whether the milestone inspection and structural reserve study has been done yet. If the condo fees are much lower than similar complexes, it would be prudent to plan for an increase by end of next year. The silver lining is that once the fees settle into their new, higher levels, special assessments should become less common and far more affordable when they do happen. 

“Most successful people are just a walking anxiety disorder harnessed for productivity.” __Andrew Wilkinson

A Sad Listing Tale

When I pulled stats for my previous post the number of condo listings that were older than six months (25) got me thinking about the stories and reasons behind their failure to sell in a reasonable period of time. The first thing that comes to mind is that the units are overpriced. Sometimes reasonably priced listings can take longer to sell because access to the property is limited or there are other issues that have added friction to the selling process. Then there are properties that, because of location, lack of amenities or with building maintenance issues, attract a smaller pool of buyers than the crowd looking for a direct ocean unit in a well maintained building with a good view. Overprice one of these less desirable units and you have a good recipe for a lingering listing. Below is a timeline of one of the older listings on the MLS. It has been for sale for over a year.

The unit is a typical 2/2 unit in a popular oceanfront complex with less than 1300 square feet and a garage. It is ground floor, south-facing and has been remodeled. The furnishings are noted as "negotiable". The buyer's broker compensation being offered is at the lower end of the scale and the initial asking price of $549,000 was slightly above the recent selling prices of similar units in the same building on higher floors with an ocean view. The sellers bought the unit three years ago for $320,000, already remodeled and with the same furniture that is now listed as "negotiable".

The listing agent uploaded over fifty high-quality photos and a video tour and had an open house the first week on the market. He had a second open house a week later and dropped the price by $10K the following week. The open houses and price drops continued until today when there have been 18 total price reductions and 17 open houses. The asking price today is $112,000 less than the initial asking price. 

When the unit was first listed there were 115 total condos and townhome units for sale in Cocoa Beach and Cape Canaveral. Today a year later, there are 226. Why hasn't this unit sold?

This one looks like a combo of several things. We certainly can't fault the listing agent. He's held a record 17 open houses, provided good photos and a video tour and has coded everything correctly in the MLS. I mention the MLS because we still have listings that are missing condo names which might hinder a buyer's search who is looking for a unit in a particular building, especially one who has an MLS auto-alert for new listings in specific complexes.

This unit, being ground floor with no ocean view is dealing with a smaller audience of buyers than are units with ocean views. The initial asking price was above recent selling prices of similar units in the same building on higher floors with good ocean views. The price reductions lagged declining selling prices for the entire trip to where we are today. Not including the same furniture that came with the unit is a silly move that only adds friction to the process. Whether the low incentive to the buyer's agent has had any effect would only be known to those agents affected, if any. 

Despite all other factors I firmly believe this unit would have sold quickly if the original asking price had been $50,000 less than it was. That would still be $62,000 higher than today's asking price. After about the third or fourth open house and price reduction you would think a reasonable seller would realize that a drastic price move was necessary. Everything about this tale suggests that we are not dealing with a reasonable seller here. I don't know if this complex has started their milestone inspection and structural reserve study but if not, our obstinate seller is in for an unpleasant reckoning.

Anyone out there hoping to sell should take this story to heart. Whatever you and your agent think your property is worth, the market will deliver it's judgment which might be different than your expectations. The 'price high and maybe we'll get lucky' strategy might be counter-productive. Lacking other obvious reasons, if your listing is older than a couple of months with no offers, it is likely priced higher than the market thinks it should be. Considering the trend of recent sales, comps from earlier this year may not be a good indicator of what asking price will attract action now. A prudent seller will listen to the market. If all it's delivering is silence, that is a message, too. The market is different than it was earlier this year and higher interest rates are affecting both mortgage-seeking and cash buyers. Listen and adapt if necessary.

"Okay. You have to stop the Q-tip when there's resistance." Chandler to Joey

I'd Love It If We Made It

The prevailing trends in the Cocoa Beach and Cape Canaveral real estate market are increasing supply and increasing days on market. Half of the condo units on the market have been for sale for over 100 days. Only three of the 24 units closed so far in October were on the market over 100 days. That suggests that the ones that sold were priced fairly and that those older unsold listings are overpriced. It's logical that increasing supply going into the slow season would increase average days on market but widespread optimistic pricing is contributing to the slowed pace of sales. 

Despite high mortgage rates, nine of the 24 sold units so far this month used a mortgage to purchase. The 24 sold were on the market for a median 34 days with a median selling price of $435,000. We've had two units to close in October for over a million dollars, a 5th floor direct ocean unit at Ocean Oasis in downtown Cocoa Beach and a third floor corner at Meridian in north Cocoa Beach. Selling prices were $1.545 MM and $1.477 respectively. Over half (14) of the sold units commanded over $300 per square foot with seven of those over $400/sq ft.

We began the year with an average inventory of around 135 units through March but then began creeping up and hit 164 by mid-June. The supply continued to increase and inventory of condo units this morning is at 225 units. 

Condo fees are going up for the reasons described in my last post. 2023 renewal insurance premiums were high enough to trigger fee increases at several complexes and now the majority are preparing for the results of the new reserve study and projected increases necessary to comply. I've been saying it for a while now but the reality is that condo living in Florida is about to get much more expensive. There is no reason to believe that prices will remain steady as the fee increases begin to happen. I think an across-the-board pullback in condo prices is almost certain to be happening by next year. The first indications are already being felt with the increasing days on market and abundance of price drops. Buyers are less likely to find themselves in a multiple offer situation than they were a few months ago and have more bargaining power than before. Based on the current asking prices, most sellers are, so far, unwilling to accept the changed reality and, if history informs, will be slow to respond to the changes. The good news for buyers is that there are sellers who are realistic and want to sell. Hint: those are less likely to be found in the group of units that have been on the market for months. 

Good luck to all market participants. Reality-based buyers and sellers are the ones who will make it to the closing table. The rest will continue to cosplay their roles until they accept reality or quit the game.

"The prerequisites for failure were all in place." __unknown

Triple Whammy

Condo fees in our area are going up, dramatically so for some complexes. Quite a few associations are facing an unpleasant trifecta of increasing insurance costs, increasing costs of maintenance and the new structural reserve requirements. VeroNews.com spells out the triple whammy of increasing costs for condo owners. Realistically there is a fourth whammy. In addition to repairs, insurance and reserves, inflation has proven to be an unwelcome surprise. Associations contracting for concrete restoration now are finding out that the costs for concrete projects have ballooned in a few years. The backlog of condos contracting for major restoration projects is growing as everyone scrambles to meet the December 31, 2024 deadline. The concrete restoration companies have more work than they can get to and pricing naturally reflects that. As we approach the deadline at the end of 2025 this will only become more pronounced. The median monthly condo fee of the units for sale right now is slightly over $550 and certain to be higher by end of next year by which time all complexes will have done their inspections and begun funding the new structural reserves.

Anyone looking to purchase a condo in Florida should be prepared for fee increases next year unless the association has already renewed their master policy and established and begun funding the structural reserves. Prospective buyers should be requesting a copy of the milestone inspection report and reviewing the association financials carefully. The majority of local condos have not completed their inspection and subsequent reserve study so in those complexes a prudent buyer should factor in a not-small fee increase once those are completed. All other things being equal, a condo unit with $550 a month fees is worth more than an identical unit with $800 fees unless that $550 a month unit is about to jump to $800. Hint: many of those units at $550 now will be much closer to $1000 by the end of next year. Offer accordingly.

Our condo inventory has continued to creep upwards with 195 condo and townhouse units for sale today in Cocoa Beach and Cape Canaveral. A third of those have been on the market for 90 days or longer. Only 36 units have gotten an accepted contract since September 1. Of the 51 units closed since first of September, slightly over half were cash deals. Half of the 51 sold units sold within 30 days of listing. With increasing supply and dwindling buyer interest anyone trying to sell a condo needs to realistically evaluate the competition. A seller with a unit that has been on the market for longer than a month should be asking themselves why one of the 36 buyers that found a unit since September 1 didn't offer on theirs. One question for those sellers: If you haven't gotten an offer at your current price how much of a price reduction do you think will be be necessary to entice a buyer next year once fees have gone up?

I may be entirely wrong about rapidly ascending condo fees but the evidence suggests otherwise. Maybe insurance will become cheaper. Maybe the legislature will eliminate or modify the reserves legislation. Maybe.

I don't know how much rain we got this week so far but I'd guess close to a foot. Add in Canadian smoke in the air and it's been a strange beginning for an October. Cheers.

"Any regulatory framework emerging from closed door meetings will benefit those in closed door meetings." _Denver Riggleman

Rising Tide of Inventory

Inventory of homes and condos for sale in Cocoa Beach and Cape Canaveral continues to increase. There are a total of 176 condos and townhomes and thirty single family homes for sale in the two cities. The median days on market for the current inventory of condos is at two months. Considering that over 80% of the condos closed so far in July sold in the first four weeks on market it seems that the majority of the current inventory is probably overpriced. There is less indication of widespread overpricing among single family homes with median days on market of current inventory at 39 days. 

Cash continues to dominate the condo market with 70% of the closed condo sales in July going for cash. I expect the over-priced listings to continue to languish while fairly priced new listings pick off the buyers. Anyone with a condo listing older than four weeks is advised to look at recently sold prices of comparable units and to adjust their expectations and asking price accordingly. Buyer mania has cooled and hoping to set a record selling price is not producing results for those who are still trying except for those few with extraordinary properties. Realistically priced units are selling.

"I would exercise caution with pre-construction condos and be aggressive (low) with offers. We have shifted from a seller's market to a buyer's market in high-end condos in a very short time." __Larry - March 4, 2005

Does This Make My Butt Look Big?

(This is a repeat of a post from 2009 that is still relevant today. As I've mentioned in recent posts, there are condos that will not satisfy any lender's requirements regardless the loan officer's eager optimism and buyers and their agents may be wasting their time looking at them.)  

Does this make my butt look big? Everyone knows there is only one correct answer to this question no matter who is doing the asking. There is another popular question that also has but one answer. That question is one that is posed to loan officers and mortgage brokers every day, "Do you foresee any issues with my getting a loan on this property?" Day one in loan officer school the class is asked this question and then instructed to shout in unison, "No, not at all." over and over until the phrase is firmly imprinted on their brains. Then, when "the question" is posed by an actual borrower, the neuro lingual programming takes over without any conscious thought and "the answer" comes forth confidently. Doesn't matter that the Florida condo that the borrower is asking about is 1800 miles away from the lender's office or that the last Florida condo loan that the loan officer did was in 2006. "We can do it" he says with a confident smile. Right. He can do it until he can't and that usually doesn't becomes evident until well down the road towards closing.

All borrowers who are buying a Florida condo would be well advised to talk to a lender in the market in which they are purchasing. There are issues with Florida condo loans that lenders will not encounter anywhere else. A great credit score and previous relationship with a distant lender might not be enough when the hurdles to closing start appearing. A good local lender who is active in our market will have knowledge about Florida-specific loan issues and will likely have encountered many of the sure-to-happen problems with previous loans. That knowledge allows him to be proactive rather than reactive in addressing these issues. Anticipating and working to solve an issue before it presents itself can be the difference in making a closing date or not.

Disclaimer: I'm not saying out-of-area lenders can't close deals here. It happens all the time, but, from plenty of personal experience, I can say without hesitation that the odds of having problems are increased when the lender is not local. Just don't expect a loan officer to admit that his performance out of state may be compromised by lack of local experience. Remember the NLP "answer" from class. I can close deals and represent buyers anywhere in the state of Florida but I don't venture outside my market because I can't do the best possible job for my client in a market I don't know. Greed and false confidence encourages many realtors and lenders to venture out onto the thin ice, often to their client's detriment. Be skeptical when yours fearlessly claims proficiency in an unknown market.

You may leave here for four days in space

But when you return it's the same old place

The pounding of the drums, the pride and disgrace

You can bury your dead but don't leave a trace

Hate your next door neighbor but don't forget to say grace 

___________Barry McGuire - Eve of Destruction, 1964

Mortgage Failure

Check out the honeybee swarm I saw on a palm tree at the Cocoa Beach Golf Course a few days ago. They were all gone two days later.

I read a startling comment today from a Florida lender who said that in South Florida, "less than 10% of loans submitted for full condo review will receive condo approval & close." I've seen my share of rejected condo loans but that number surprised me. Those applying for a condo mortgage will hear about the condo questionnaire but may not fully appreciate the root canal that getting one completed can be. Florida conventional condo mortgages have their own separate qualifying guidelines that are set by Fannie Mae and Freddie Mac and the initial steps in getting a condo loan approval includes having the condo association complete the dreaded condo questionnaire. There are two forms of this document depending on the amount of down payment being made, full condo review as mentioned in the opening sentence and the limited review which a higher down payment can allow. To qualify for a limited review, the unit must be purchased as a primary residence or 2nd home and typically requires 30% down payment although there are ways around this. Investor units do not qualify for limited review. Things that matter and can lead to a loan denial with a a full review that don't matter with a limited review are association financials including reserves, percentage of owner residents and percentage of units past due among other things.

The reviews have always been quite thorough and, earlier this year, became even more so with the addition of questions about building condition and existence of safety concerns. The vague nature of the new questions has led to some associations refusing to complete questionnaires for fear of exposing themselves to liability. There are questions that start with "Is the association aware of..." and "Is it anticipated that...". I can understand the reluctance to sign one's name to a question like this. Here is a more in-depth look at this growing trend of refusing to complete the questionnaire from the Orange County Register (CA). There are a few associations in our market that already refuse to fill out the questionnaire effectively making the units there cash-only. 

Buyers hoping to buy a Florida condo who plan to use a mortgage to purchase need to discuss with their buyer's agent their down payment percentage and whether the purchase is for residence or investment so the agent can avoid units in buildings that won't be able to satisfy the underwriters. Becoming familiar with the requirements on the Florida condo full review will help educate buyers and agents alike about what criteria are critical to approval. Here's a copy of the Fannie Mae full review questionnaire that a buyer's lender is going to want answered by the association. Save a lot of time and effort by avoiding condos that can't satisfactorily answer these questions or be prepared to put 30% down to downgrade to the limited review or pay cash.

"A debate between an expert and a crank does nothing other than elevate the crank." _Mehdi Hasan 

Increased Supply

The king surveys his kingdom

Inventory has been steadily creeping up since the end of snowbird season. The number of condo units for sale in Cocoa Beach and Cape Canaveral was around 135 units the first four months of the year but has since crept steadily upward and this morning stands at 164 units for sale. A little over a year ago in April of 2022 our inventory bottomed at 34 total condo units and a mere 12 single family homes for sale in our two cities. 

Sales activity remains steady although with pockets of softening in selling prices in some condo complexes. There were 58 closed sales in the month of May at a median price of $385,000. Out of 58 units, 35 closed for over $300 per square foot with ten of those bringing over $400 per foot. Two thirds of them sold for cash. Time on the market has increased with the median of 25 days on market for those closed in May. So far in June, 19 units have received an accepted contract.

Single family home activity is strong although supply remains scarce. Four single-family homes have received contracts so far this month with one of them selling for full asking of $1.225MM first day on the market.. Selling prices for homes likewise remains very strong with 13 of the 28 homes for sale asking over $1MM and three of those over $2MM. 

We are just now starting to see a few local condos beginning their milestone inspections which must be completed by the end of 2024 along with the subsequent structural reserve study. Agents are now required to provide the milestone inspection results and structural reserve study to buyers if requested. I would advise prospective buyers of Florida condos to ask for these documents. Be aware that very few condos have done these yet but as we move through the rest of this year and into next, they will become available. The results of both could change a buyer's mind about purchasing a unit. The structural reserve study will determine how much money needs to be raised for repairs that the milestone inspection recommended and by what date. For some older buildings in need of repairs soon, the increase to monthly fees could easily double or triple the current fee. Well-maintained buildings with no existing concrete issues will be among those least affected. Older buildings with obvious concrete damage will not. Caveat emptor.

"If you’re easily offended, you’re easily manipulated.” _unknown

How Much is Too Much?

I was reading an article in the Tampa Bay Times about the startling new flood insurance increases and was looking at their posted chart (left) when I noticed the zip code at the top of the chart, 32931. What is this, surely a typo or a mistake? 

[Click the chart for a larger image.]

The new rates that were announced this week put Cocoa Beach in the number one position as getting the highest increase of any zip code in Florida. Those with existing flood policies have a little breathing room as premium increases are capped at 18% per year for them but those buying a new flood policy will see the full rate at purchase. This new Risk Rating 2.0 as FEMA calls it went into effect in April and the intent is to price policies based on actual risk. Many Floridians have gotten away with unrealistically low flood premiums in the past but that era has ended. 

The reported increase for new national flood policies for affected properties in Cocoa Beach is 761%. Flood policies in Cocoa Beach that were less than $1000 before this year will now cost over $6000 a year on average. Note that flood insurance is typically only required by lenders for homes that are in an at-risk zone, which is a minority of homes in Cocoa Beach. Those looking to buy a home here need to check for flood zone status of the properties they're considering and to include the cost of flood coverage if they're buying in a flood zone. Note that these increases are for federal flood insurance only and don't affect regular homeowners and wind coverage rates which are set by the insurance companies. Properties in at risk zones will typically be required to carry flood coverage by their mortgage holders as are those with homeowners' policies from Citizens which now requires all policy holders to also have flood coverage.

You can search for flood zone status for specific addresses in Brevard County at the County's Flood Map below.

Current Effective Brevard County Flood Zone Map

A good summary from the Tampa Bay Times here who also posted the chart above.

"Experience is making the same mistake over and over again, only with greater confidence." _unknown

Mini Slow Season

May is traditionally one of our two slowest months for real estate in Cocoa Beach and Cape Canaveral, the other being October. Sales remained strong in April as properties contracted earlier during the spring season closed while inventory remained practically unchanged. 

During April there were 76 closed residential properties, 63 condos and townhomes and 13 single family homes. Lowest price paid for a single family home was $535,000 for a 2965 square foot 5/3 in Cape Canaveral that needed some TLC. Median price was $810,00 with five sales over a million and the top dollar sale was a beautifully remodeled direct oceanfront two story in south Cocoa Beach with 3670 sq ft with six bedrooms and 4½ baths and a pool that closed for $3.17 million. 

Median selling price for condos was $385,000. Lowest selling price in the month was $75,000 for a tiny studio in Cape Canaveral far from the beach. Highest selling price for condos was $950,000 for a gorgeously remodeled and fully furnished 5th floor corner direct ocean Crescent Beach Club in south Cocoa Beach. It is a 3/2 with 2278 square feet and a single garage. Slightly over half of the condo sales were cash and median time on market was 24 days. More than a thrid of the sold units were on the market less than two weeks.

Selling prices remain high with eleven condos bringing over $400 per square foot although prices have declined in several popular complexes. Notably, among the weekly rental complexes, a Sandcastles 2nd floor 2/2 side unit closed for $515,000 while a 7th floor Canaveral Towers 2/2 sold for $550,000. My vote for most notable sale of the month was a remodeled and furnished 5th floor direct ocean Royale Towers Sand Dollar 2/2 that closed for $655,000 or $476/sq ft. That's a remarkable price for a unit in a complex with a two month minimum rental restriction. More remarkable prices are happening at The Diplomat in Cocoa Beach where 60 year old, 2/1 units with no garage and no ocean view have closed over the $300,000 mark.

Activity seems equally spread over all price ranges both waterfront and not. Buyers are still active and attractive units in good buildings are still commanding high prices and selling quickly. We usually see activity increasing as we enter the summer months and with the current inventory levels multiple offers will likely continue to happen with attractive new listings. Buyers paying with cash will continue to win most of these multiple offer situations. Good luck to all hoping to purchase. Make your offers as clean as possible with as few contingencies as you are comfortable with for your best chance at success. Those looking for a deal are likely to be disappointed.

Florida, among six other eastern states, just recorded the hottest January through April season ever experienced. I can confirm that the heat is here in Cocoa Beach. What is not here is the much-hyped "super blob" of seaweed that the media has been warning us about. It may eventually arrive or it may pass by in the Gulf Stream if it doesn't coincide with easterly winds as it passes. We get sargassum on our beaches every year and always have. Some years it is so thick that the beaches are covered and you have to wade through a pile just to get to the water. Some years there is very little. It's always passing by in the Gulf Stream during summer but it needs sustained easterly winds to get onto our beaches. Beaches in the Yucatan are dealing with piles of it now and our turn may come. It's a natural thing and something that most see as little more than a temporary nuisance. It will disappear like it always has. For those walking the beach when the seaweed is washing ashore, take the time to pick up small pieces at the water's edge and shake them out over the sand. You might be surprised at the creatures that fall out that ride with it, shrimp, crabs and an occasional sea horse among others. 

Congrats to all graduates. Enjoy your summer as you get ready for the next stage of your lives. Best of luck to you all.

“If you aim at nothing, you’ll hit it every time.” _Butch Harmon

In-Between Season

There are only two houses for sale in Cocoa Beach and Cape Canaveral asking less than a half million dollars. Median asking price of the 25 houses for sale in the two cities is over $800,000. Of the 134 condos and townhouses currently for sale only 11 are asking less than $200,000. Median asking price is $440,000 with 46 units asking over a half million.

Thirty units have closed so far in April, seven of those bringing over $400 per square foot and another eleven over $300/sq ft. Shocking high selling price of the bunch was a 5th floor, furnished, direct ocean Royale Towers 2/2 Sand Dollar unit that closed for $655,000 or $476/sq ft. The three vacation rental units closed so far this month brought an average $404/ sq ft, none of them direct ocean, east facing units. Prices for vacation rental units have pulled back from last summer's levels with lower closing prices in three of our biggest vacation rental buildings. Many of the units still for sale in these buildings have asking prices that are completely out of sync with recent selling prices. Those hoping to buy a vacation rental unit would be well-served by knowing the prices of recent sales. They are considerably lower than the same units were selling for last summer. 

Speaking of asking prices, over half of the units closed so far in April were on the market less than 30 days. Of the 134 units still for sale over half have been on the market longer than that with 53 of them for sale longer than 60 days. That seems to suggest widespread overpricing. Buyers, know the comps, and don't overpay just because the seller is out of touch. Make the case for your offer with recently sold comparable properties and if the seller refuses to acknowledge reality, move on to one who is open to reason. The sellers who are pricing correctly are the ones selling. The optimistic bunch will continue to stagnate on the MLS until the reality check comes.

The bulk of the snowbirds have departed and traffic, other than the air show traffic this past weekend, has returned to its more leisurely off-season pace. From now until June is one of our two good-weather, no-crowd seasons. The other is Labor Day until Thanksgiving barring a hurricane. Things will heat up again as schools begin letting out for summer in late May and our summer vacationers start arriving.

"Twitter is such a mess, it’s as if they drove a clown car into a gold mine..." _Mark Zuckerberg

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