Gimme Shelter

Thoreau said, "On tops of mountains, as everywhere to hopeful souls, it is always morning." From this hopeful soul, here is a beautiful morning last week in south Cocoa Beach.



One month into the new year and, as expected, activity has picked up even though January's closed sales are down over 50% from our peak year of activity, 2005. We have had a total of 23 closed MLS sales of condos in Cocoa Beach and Cape Canaveral. There were 6 single-family sales in the month with only one over $500,000. Three of the condo sales were in oceanfront, short-term rental buildings. That particular area of our market is getting a lot of attention as prices have now retreated to the point that income levels start to make them attractive. When you can get into a unit with $2000 of monthly costs including mortgage payment that rents for $900 per week, cash flow becomes possible. It's then all about occupancy levels. Prices of side-ocean view units have dropped from the $300,000+ range to the $260,000 neighborhood.

Prices of closed condos in January were all over the map with an 1804 sq.ft. Crescent Beach Club top floor unit closing for $350,000 within days of a top floor 2678 sq.ft. unit next door at Casa Playa closing for $600,000. Side ocean view 2/2 units at Spanish Main and Chateau went for $260,000 and $255,000 respectively while a bank owned direct ocean 2/2 Cape Winds unit sold for $265,000. A brand new 1864 sq.ft. Puerto del Rio was purchased for $235,000. A quick-draw party pooper stole a 6 year old Solana Lakes 2/2, 1698 sq.ft. fully furnished unit for $195,100. The neighbors are probably less than thrilled with that especially considering that 2 identical units closed one year ago for $300,000 each. In 2005 these units peaked at over $400,000.

MLS inventory Cocoa Beach/Cape Canaveral Feb. 3, 2008

condominiums______866
single family homes__135

Weather for the last week has been in the 80s with light winds and a persistent chest high swell that has made at least one realtor very happy. Our sandbars have returned to old-time Cocoa Beach shape making for long, fun waves and the water has warmed back up enough to retire the wetsuit for another year. For fishermen, the good news is that schools of pogies are showing up just off the beach which means the spring run of cobia can't be far behind. Further offshore, dolphin, wahoo and bottom fish like grouper and snapper have been chewing hard and it promises to get better as the weather continues to warm. It's a great time to be a Cocoa Beachling, or should that be Beachonian, ... Beachite? Whatever, it's a good time.

All life is an experiment. The more experiments you make, the better.
Ralph Waldo Emerson

January's Deals and Steals

What a crazy market it's been so far in 2008. Oceanfront steals have been sparse with most of the jaw-dropping price action happening in riverfront condos and single-family homes. The most outstanding oceanfront deal so far in 2008 was a top floor Crescent Beach Club 3/2 with 1804 sq.ft. and views of both the ocean and across the Banana River to Merritt Island. Closed for $350,000.

The ever-popular Diplomat non-ocean 2/1 units have retreated to $125,000 and $130,000 respectively for the two closed sales so far this year. There were three sales of these units in 2005 for over $200,000.

A 4th floor 2/2 direct river Four Seasons closed this month for $220,000. That's $167 per square foot for a great river view in a well-maintained complex with a private garage.

A top floor 2/2, side ocean view at Chateau by the Sea closed for $255,000. These units fetch $800-$1000 per week in season and $600-$700 weekly off-season.

As I search the MLS this morning, there are remarkably few aggressively priced direct ocean units offered. I can find several deals in direct river units, however. A sampling would include a top floor over-sized 2/2 Harbor Isles overlooking the Thousand Islands for $269,000 with this view.


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A side view River Lakes 2/2 for $250,000 with this view. Boat slip available for no extra charge.


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A Pebble Cove ground floor direct river 3/2 for $189,000. This one was listed for $275,000 just one year ago.

Last is a 1351 sq.ft., 2/2 Rock Pointe direct river for $179,800 with garage. Needs some updating.

If you hope to pick up a property at a good price, be aware that you'll be competing with vulture investors who are actively scooping up attractive deals as they happen. They are playing hard ball with offers but, in most cases, are offering cash and a fast closing with no contingencies. As I've stated before, you better be able to support your offer with facts. Just offering 20% below the asking price and hoping for acceptance will not get the job done. Keep up with what's happening in our market so you'll know a deal when you see it. I'm still seeing sales close significantly below asking price that are not great deals. It makes more sense to pay full asking price for a $200,000 aggressively-priced listing than getting a 20% discount on a similar unit offered for $275,000. Knowledge is power. Do your homework.

MLS inventory Cocoa Beach/Cape Canaveral Jan. 27, 2008

Condominiums______875
Single family homes__127

Secret Agenda - Revisited

I first commented on the issue of agent bonuses back in Feb. 2006 and again in November of that same year. I'm revisiting that subject because of a conversation I had yesterday with another agent concerning agent incentives. In case you missed those two posts here they are.

[Nov. 2006]
Looks like someone else has been investigating the whole buyer's agent compensation issue. The Wall Street Journal published an article this week by writers, James R. Hagerty and Ruth Simon, entitled "Do Real-Estate Agents Have a Secret Agenda?"

It was like deja vu all over again. If you've been reading this blog for a while, you may remember my post on Feb. 26 of this year entitled "Conflict of Interest". In it I raised the same concerns that these writers addressed in their piece, sellers trying to subvert the process by offering sweet temptations. Rather than rehash the whole issue, I've repeated the post below. I'm not saying all bonuses are undeserved, but, I do think that buyers should be made aware of extra compensation intended to attract the buyer's agents. If your agent goes above and beyond the call of duty, she may deserve every penny being offered. If it was an easy deal for her, she may be happy to rebate that bonus to you. Knowledge is power.

[Feb. 2006]
I've been thinking about agent bonuses and commissions for quite a while. As our market has slowed, we are seeing sellers offering higher commissions and bonuses, supposedly to get agents to push their properties. I received a postcard this week from a developer offering not only 3% commission but also a $1000 bonus to any agent bringing a performing buyer. (note from 2008: As the market has evolved since those posts, bonuses have gotten bigger, as much as 10% commission and bonuses as high as $50,000.) This is troubling to me. It suggests to me that the seller offering the bonus thinks that I would steer my buyer to their property because I would make more money. Folks, if your agents are selecting properties to show you based on the amount of money that they will make, they need their butts kicked. This whole idea of paying a bonus to the selling agent seems to me to be a serious conflict of interest and an incentive to engage in unethical behavior. Without asking, a buyer may never know which properties are more lucrative for their agent, or, if they are even being shown all properties. As it stands, bonuses are legal and commonly offered. I'll go on record as saying the practice has a foul odor to me.

Poof! Half million dollars, gone.

Yesterday's hotsheet revealed a remarkable new listing that qualifies for smoking deal of the moment. The house (pictured above) is 4130 sq.ft., 4 bedrooms, 3 baths with pool and dock room for multiple boats on 90' of open Banana River. Last sold in 2005 for $1,000,000 and listed yesterday by the bank after foreclosure for $534,900. I don't expect this one to last very long.

[update Jan. 17] I inspected the house above this morning and a more clear picture emerges. The photo above was taken some time ago as the pool is now dark green and full of algae. There is no flooring in many of the rooms, damaged sheetrock from a leaky roof, visible mold and other issues. It may still represent a great deal at this price but it is going to require quite a bit of work to restore it to livable condition. Click here to see a slideshow of photos from this morning.

[update Jan. 18] The house is under contract as of today.

Next deal today is a 2nd floor 2/2 in a small riverfront complex in south Cocoa Beach across the street from the beach. Views from the big screened balcony are across the wide part of the Banana River to Merritt Island along a beautiful shoreline (pictured below). This one comes with a deeded boat slip on the open river and is listed for $245,000. Last 2/2 unit sold in this complex this year went for $272,000 without the boat slip.



Last of today's deals is a 4th floor direct Harbor Isles, over-sized 2/2 with amazing views across the Thousand Islands for $269,000. This will break new ground in this complex as the last sale of a 2/2 direct river was for $330,000. No photos of this unit.

Email me if you'd like to receive notices of these deals as they surface.

2007 Year in Review

Just in case we didn't notice that a new year had begun, Mother Nature delivered a wake-up call in the form of a cold snap to the 30s with howling cold winds on January 2, 2008. As I sit here shivering on January 3rd, the radar is showing snow flurries off the coast east of Daytona Beach. This after the last week of 2007 hovered in the mid 70s with calm, beautiful, beach-lounging conditions.

2007 was a year of major changes in our real estate market. The mortgage market was forever changed in August when the sub-prime nastiness boiled over and, for a brief time beginning August 3rd, over a dozen major lenders temporarily suspended funding. We ended the year with over 200 lenders no longer in business and lending standards tighter than ever. In spite of the drama, deals continued at a steady but slowed pace.

All stats here are from the MLS. Total sales will be slightly higher when private sales are factored in.

Single family home sales in Cocoa Beach and Cape Canaveral were actually higher with 70 closed sales in 2007 compared to 69 in 2006. The highest selling price of a single family home as recorded in the MLS for the year was $1.82 million for a 6724 sq.ft. beauty on the open river at River Falls in south Cocoa Beach. Only 4 single family sales over a million were reported with none in Cape Canaveral. Two of the four sales were in River Falls. There were six sales of single family homes under $200,000 in the year. Median price was $319,000.

Condo sales were weaker for the year in the Cocoa Beach and Cape Canaveral market with 385 closed units compared to 476 in 2006. The highest selling price of a condo unit for the year was $1.875 million for a fully-furnished, 4617 sq.ft. unit occupying the entire top floor of Ocean Estates condo in Cape Canaveral. We had 4 total sales of condos for $1 million or more. There were 8 condo sales under $100,000 and the median selling price was $239,000. There were 42 sales of condos over $500,000 and inventory in that troubled segment of the market is at 126 this morning, exactly a 3 year supply at last year's sales rate. The under-$500,000 supply of 690 represents a 2 year supply at 2007's rate of sales.

We had a burst of condo sales in our office at the close of the year and prices of all those deals broke new ground to the downside. Expect to see shocking low selling prices in the next few months as the weaker sellers are picked off. I will venture a small prediction here for 2008. I think selling prices in the short-term rental condos are close to a resistance point (I like that description better than "bottom" but the idea is the same). My reasoning is that, with the much higher incomes of weekly rentals, these units' owners will have less pressure to sell for give-away prices. Income equals staying power. I think this area of our market represents the most opportunity in 2008 for exactly that reason; income. In all other areas I expect more price deterioration although probably not to the extent that we saw in the last half of 2007. I also expect a reckoning of some sort with the dozens of unsold new luxury condos that are sprinkled throughout our community. There are a handful of developments that are in limbo with no action for months. It seems likely that major price reductions will be necessary to move the supply that has been languishing for months. We'll see.

Favorite posts of the year.

I got more mail, calls and comments about a particular post this year than at any other time in the almost 3 years that I've been doing this blog. That post was the tongue-in-cheek "If Condos Were Watermelons" entry from September of this year. I think the supposition that condos are a commodity clicked for a lot of people. Other favorites were "Reality Check 101" and "Reality Check Part 2" My personal favorite of the year was the photo essay "Seven Reasons for Cocoa Beach in February" That one was the most linked-to post of the year as best I can tell.

2008 has begun in much the same fashion as 2007 ended, with outstanding deals. The first 2 closings of the year both lowered comps in their respective complexes. The first was a 4th floor, 1316 sq.ft. direct river, 2/2 at Four Seasons that closed for $220,000. Deal number two, in which I represented the buyer, was a 5th floor, 2/2 at Chateau by the Sea for $255,000. These sellers were asking $405,000 for this Chateau unit in the summer of 2006. That popular tactic of sellers in 2007, waiting out the market, did not pay off in this instance.

Happy New Year all. Stay tuned. This promises to be an interesting year.

December Triple Witching Deals and Spills

As of this triple-witching Friday, Dec. 21, 2007 we've had 20 closed sales recorded in the MLS in Cocoa Beach and Cape Canaveral since the first. Here are a few that I thought interesting.

A classic 3/2, 1950s Florida concrete block home on a wide canal, totally remodeled for $318,000.

A crummy rundown home across the street from the beach, $215,000.

A 2/2 top floor Cape Winds for $260,000. These units rent for $800 to $1100 per week. The view below.



A remodeled, 1244 sq.ft. 3rd floor River Lakes (one of my favorite river complexes) for $250,000. Boat slips, ramp, boat storage and the coolest riverfront pool in town make this complex special. Here's the view across the islands.



A 1316 sq.ft. Canaveral Sands side ocean view for $175,000.

A furnished 3rd floor, 1286 sq.ft. Sandcastles for $285,000. Rents for $800 to $1200 per week.

There were other good ones but these stood out. I'm happy to report that my little office represented the buyers in 4 of these outstanding deals. If you're looking to buy now, do your homework and make sure you understand this market. Not every deal this month has been a good one for the buyer. If you hope to buy low, you better be able to justify your offer. The better your research, the better chance you'll have of convincing the seller of the prudence of accepting your offer. I write a one or two page letter with justifying reasons for my price for every offer I make. An unjustified low offer will get a negative reaction every time. A well written cover letter with comparables, market trends, time costs and other inductive arguments will give a low offer a much better chance of at least being considered and hopefully accepted or countered.

This will likely be my last post of 2007. I'm off for a well-deserved rest with family elsewhere. I hope you all have a very happy and safe holiday season. I'll do my traditional year in review post in early January. I expect some of the stats to be shocking. Until then, Sanon.

Ahhhh-Choooo, sniffle sniffle

If you've not been in Cocoa Beach or the other beaches of central east coast Florida in the last month you've missed our most unwelcome visitors of the year, billions, if not trillions, of the dinoflagellates, Karenia brevis, also known as red tide. The photo above is of one of the tiny boogers. In the massive blooms like the one we are currently experiencing, the irritants released into the air and atomized by the surf induce coughing and sneezing fits. Some outdoor beachside establishments like the Beach Shack have actually closed on particularly bad days. Luckily, I can only remember 3 outbreaks like this in the last 20 years. Some of the Gulf coast communities of Florida have to deal with this on a much more regular basis.

On a brighter note, our inventory has dropped to it's lowest level of 2007. Single family home supply is almost the same as at our peak in March this year but condo supply has been reduced by over 150 units since that time. November sales were below last year's with only 16 closed condos and 5 single family homes. I am continuing to put deals together at a steady pace as sellers are becoming more willing to accept the reality of the market.

MLS inventory Cocoa Beach/Cape Canaveral Dec. 13, 2007

Condominiums______865
Single family homes__156

I enjoyed seeing many of you at our office Christmas party last week. A good time appeared to be had by all. I was a little tardy making it to the grilled shrimp station and missed out completely. I hear they were outstanding. Thanks to all the artists who showcased their art.

Cheerleaders and Bad Haircuts

The National Association of Realtors has been at it again, spinning the latest home sales and inventory numbers. They've been joined by thousands of eager agents with new real estate blogs hoping to snare a buyer off the internet. By and large the blogs contain the same self-serving, blindly optimistic message that NAR has preached through the entire downturn. Here's a subjective look at NAR's "Now is a great time to buy" campaign from one year ago. Blogs are now being touted as the hot new marketing tool by the gurus of realtor self-promotion. I think most agents would have more credibility if they just dressed in pink and waved pom-poms like the ladies above while wearing "Time2Buy" buttons. At least these two were doing it for a good cause, breast cancer awareness.

I've taken a little heat from my peers for my cautious commentary and occasional warnings about the direction of the market even as those predictions have turned into reality. Some of them apparently perceive this blog as being contributory to our market downturn. I'll borrow a quote from this month's Wired magazine editorial in response. "Dude, when you see the truth as a takedown, you know you've crossed that line into the kook zone."

As always, I will continue to report on our market without slanting the truth in hopes of generating a commission check. Shame on any realtor who does otherwise.

Here are a few haircuts of note from November 2007.

First trim of the month was an 1862 sq.ft. Shorewood unit that was first listed in January of 2006 for $489,900. After 4 withdrawals and relistings that included 9 price reductions, it closed in November for $285,000. Now that's a haircut.



Our second painful coiffure in November was a 2nd floor corner direct ocean unit at The Sands in Cocoa Beach. It was first listed in April of 2006 for $535,000. At various times the seller was offering 1 year's HOA fees, home warranty, closing costs, rate buydowns and even plasma TVs in an attempt to entice a buyer. Perhaps an earlier price reduction would have sold the unit. Closed yesterday for $300,000. Ouch!



There were also a few closings of foreclosed and otherwise distressed properties last month. How about a 2 bedroom townhome in south Cocoa Beach with garage, 1 block from the ocean? Sold for $125,000. A 2/2 Banana Bay foreclosure? Sold for $157,900. Banana Bay townhomes sold for as much as $250,000 just 2 years ago. We don't have a ton of properties on the market with such radical reductions but they are out there. Buyers, please do your research before making an offer. Sellers, four important words, "tick tock, tick tock". Know your cost of waiting before drawing a mental line in the sand.

"You have to learn the rules of the game. And then you have to play better than anyone else."

Albert Einstein