Wrapping November

The Cocoa Beach and Cape Canaveral MLS is reporting that 30 condo and townhome units were closed in the month of November in the two cities. Median price for the closed units was $350,000 and median time on market was 111 days. Exactly half of the sales were cash deals and only four units closed for over a half million dollars.

For sale inventory in Cocoa Beach and Cape Canaveral has increased to 294 total condo and townhome units. Median time on market for these unsold units is 89 days. There are 47 single family homes listed for sale with a median time on market of 101 days. Twenty of the 47 homes are asking over a million dollars with a high of $3.795 MM for an oceanfront home in south Cocoa Beach. Lowest asking price is $525,000 for a half-duplex in Cocoa Beach. Just five houses closed in November with one closing for over a million dollars. The disparity between what's selling and what's for sale is widening.

This slow pace of activity usually continues through the upcoming holidays and begins to heat up by the end of January. Considering the decimation of snowbird rentals on the Gulf Coast pushing more snowbirds to our area, escalating costs of condo ownership everywhere in Florida and the robust 2024 growth of paper wealth in the condo buyer demographic, this snowbird season looks to be interesting as buyers and sellers are being pulled in opposite directions by powerful economic forces. Will prices hold up or are we due for a reality check? Condos are more expensive to own but the people who typically buy beach condos have just had one of their best years ever in investment growth. I look forward to following the drama as it plays out through April. Look for the play by play here. Happy Holidays all.

"If you don't go, you'll never know." _Jamie O'Brien (too old to be invited to the Pipe Masters)

Approaching Deadline - December 31

Inventory has remained in the same tight band for several months now with a total of 279 condo and townhome units and 54 single family homes offered for sale this morning in the Cocoa Beach and Cape Canaveral MLS. Median time on market for the houses is 92 days and for condos, 86 days. For properties closed within the most recently reported one month period, selling price to original list price was 88.8 % and time on market before selling was 130 days.

Monthly condo fees have been creeping up as we approach the end of year deadline for the new Structural Integrity Reserve Study and more associations come into compliance. I have no idea what percentage of local condo associations are still not in compliance but I saw a recent news story that over half of affected Volusia County condos have yet to do the study. That study looks at the results of the milestone structural inspection and calculates the monthly contribution required to completely fund each item of structural maintenance at the time the inspection estimates they'll be needed. For instance, if the study estimates that a one million dollar concrete restoration project is going to be needed in five years, the association must start collecting an additional $200,000 per year from owners. With most condos not reserving for concrete maintenance prior to the new law, the additional contributions necessary to comply are pushing monthly fees higher. Forty five of the currently for sale condo units have monthly fees of $900 or higher. By January we could see quite a few more in that range.

Sales are slow as is usually the case this time of year. Only twelve condo and townhome units have closed in our two cities in the month of November so far at a median selling price of $400,000 and a median time on market of about 120 days. Just two single family homes have closed, one of them within eight days on market and the other after 139 days.

Sales activity should remain slow until after the first of the year if we stick to historical trends. From what I'm seeing rental prices for the upcoming snowbird season look to be as high as they've ever been. The destruction of thousands of Gulf Coast beach properties during the storm surge events of this hurricane season has pushed a lot of snowbirds to our coast in search of rentals putting additional pressure on our limited supply. Any snowbirds looking for a rental for the upcoming season would be well-advised to get on the search immediately if they haven't already secured a property. Be prepared to pay up but, silver lining here, possibly less than you payed on the more-expensive Gulf Coast beaches.

Happy Thanksgiving y'all. Should be an interesting time around the dinner table this year. Uncle Larry may be invited to sit at the kid's table.

"You can complain because roses have thorns, or you can rejoice because thorns have roses."_Ziggy

Yes, It's Slow

This month has been unusually slow, even for one of the historically slowest months of the year. As of right now, October 30, we have closed just 19 condo and townhouse units in the month. For perspective that's slower than any of the crash years of 2006, 2007 and 2008, the only years of the last twenty when we've closed less than 30 units in October. Three years ago in 2021 we closed 80 units in October. Our busiest month so far in 2024 was March with 63 sold units.

Median closed price of the sold units was $322,000 and median time on market was 98 days. All but one of them closed for less than the original asking price. Average selling price to original ask was 91%.

Single family homes have been unseasonably slow as well with just eight closed sales so far in October. Median selling price was $773,000 with a median time on market of 149 days. There are currently 50 single family homes for sale n our MLS with a median asking price of $900,000 and a median time on market of 103 days. There is only one listing asking less than $500,000.

There are 273 total condo and townhome units on the market this morning in Cape Canaveral and Cocoa Beach with a median time on market of 93 days. The flow of new listings has slowed over the last few months which is not unusual for this time of year. We typically get a surge of new listings after the first of the year as we transition into snowbird season. I am expecting a strong snowbird season with a lot of displaced snowbirds who would have been on the west cost except for hurricane damage impacting supply. There are still rentals available for the 2025 season for those who might be looking. I am seeing several attractive oceanfront condos available in the $3500 to $5500 a month range for snowbird season.

Th daily rains finally let up a few days after Hurricane Milton passed directly over Cocoa Beach and the Cocoa Beach Country Club was able to open the golf course up after being underwater for weeks. Local golfers will be trying to get in as many sessions as possible during the mild weather before the snowbirds begin arriving in January and average nine hole rounds creep back towards three hours.

“There comes a point where we need to stop just pulling people out of the river. We need to go upstream and find out why they’re falling in.” _Desmond Tutu

Are Condo Prices Rising or Dropping?

Last week's Vulcan rocket launch as seen from my office.

The answer to the title question is both. It seems that overall prices are declining with some complexes recording significant declines [see my last sold example below], but we have occasionally seen sales closing at prices that are out of step with the overall market. I was reminded of this today when I was reviewing recent condo sales and noticed the closings of two similar oceanfront Cocoa Beach 1/1 condo units on the same day, one for $210,000 and the other for $350,000. Both were south side units, the more expensive one 2nd floor and both had assigned open parking and were within 35 square feet of the same size. The higher priced unit was more nicely remodeled but the lower-priced unit was in a building that allows weekly rentals so potential for higher income is much greater with the cheaper one. The buildings, unit sizes, amenities and views were essentially the same and a buyer decided that the better remodeling job in one of them was worth $140,000 more than the other.

Buyers are still sorting out how to deal with the new requirements for signed Buyer Brokerage Agreements. Their reactions to this have been varied and have slowed or stopped more than a few searches. I've heard several say that they would not be signing any agreements and would just contact listing agents directly in hopes of not being stuck with owing an agent a commission at closing. This on top of the uncertainty of future condo fees related to the new reserve requirements just adds more friction for sellers during this historically slowest time of the year. Toss a couple of hurricanes into the mix and selling a Florida condo in late 2024 becomes an unpredictable challenge.

Despite the hurdles, sales are closing. A total of 46 condo units have closed since September 1 with 58% of those closing for cash and a median time on market of 88 days. Median selling price was $387,000 with a median condo fee of $630 per month right in line with the median fees of the remaining inventory of 271 units.

Sales of note included a retro penthouse unit with panoramic Banana River views at Rock Pointe in Cocoa Beach that closed for $910,000. This 37 year old unit has 3500 square feet, 3 bedrooms, 4 baths and two garages and has a wrap balcony at the tip of a peninsula overlooking the river. 

A tastefully remodeled 28 year old, 6th floor direct ocean Majestic Seas of Cocoa Beach with 1924 square feet, 4 bedrooms and 2 baths closed for $849,000 after 25 days on the market.

A beautifully remodeled 3rd floor direct ocean end unit 3/2 Shorewood in Cape Canaveral with 1922 square feet, also 28 years old, sold for $740,000.

A nicely remodeled top (4th) floor, direct Banana River, Banana Bay of Cocoa Beach end unit 3/2 with 2018 square feet sold for $540,000 in 3 days.

An upgraded 2050 sq. ft. 2nd floor, direct wide-open Banana River 3/2 River Bend in south Cocoa Beach closed for $514,000. 

A 4th floor south ocean view Canaveral Towers furnished 2/2 closed for $485,000, confirming a low for this complex as the second unit to close for this price. This unit was purchased for $550,000 in 2023 when multiple units closed in the mid to low $500s. That price range seemed like a deal at the time after multiple identical floor plan units closed in the building in 2022 in the $700s with one closing for $839,900. Apparently mid $500s was not the bottom for this cycle there.

Now that we have a named storm in the "box" which includes the entire Gulf of Mexico, insurers have stopped binding new policies which will effectively torpedo most closings scheduled for this coming week. Barring another newly named system there's a chance that some closings may happen next Friday once Milton is far away in the north Atlantic.

Everyone should be gathering up any unsecured or unanchored items in the yard and furniture off balconies in preparation for the winds of this approaching storm. The winds will probably arrive Tuesday ahead of the storm which looks to pass over quickly on Wednesday. It will be brief but wind is predicted to approach hurricane levels for a few hours. Anything that can be blown around can become a deadly projectile. Do yourself and your neighbors a favor and try to reduce the potential projectiles by putting loose items inside or in a garage. That definitely includes trash cans. Stay safe y'all.

Conversation with an AI;

"Ignorance is bliss, hey?" 

"I am unable to experience bliss but I am able to model the benefits of ignorance."

Denial or Optimism?

This is a timeline of a condo sale that is typical of many current listings. The seller hit the market last summer at a price that seemed high but within the ballpark considering similar sales months earlier. The unit was first listed last July which was about the time we were starting to see some areas of softening in our condo market. Asking price started at $575,000 but was dropped to $549,000 just three weeks in and cancelled a week later. Three months later, in November, it came back on the MLS asking $545,000 and was dropped to $535,000 two weeks later. On New Years Day it was dropped to $519,900 and again to $499,900 three weeks later. One month later another small drop to $495,000 and two weeks later to $485,000 and $475,000 two weeks after that before being cancelled in early May. It came back on the market in mid-June at $474,900 and dropped a week later to $449,900 where it sat until mid-August when it finally got a contract after being on and off the market for slightly over a year. We won't know the actual contract price until it closes. Sticking with a higher-than-market-value asking price "just in case" despite descending prices of comparable sales is a costly strategy as this seller found out. 

A timeline of multiple price drops is not uncommon. Almost half (47%) of all condo listings in Cocoa Beach and Cape Canaveral have been for sale for over 100 days and, of those 126 listings, 90 have had price changes. Much of the inventory is overpriced and will need price adjustments if the sellers hope to attract a buyer. Condo buyers, who may find a promising looking listing after wading through a predominantly overpriced inventory, are then faced with rising condo fees, higher down payment requirements and increasingly expensive insurance, the very things fueling the declining prices.

What could this seller have gotten for this unit last year had their price been better earlier? It's anyone's guess but the fact that the condo market was changing and softening was obvious to anyone who was paying attention. Paying close attention to closing prices and asking prices of other units that were attracting buyers might have hinted to this seller that their price was the problem but they either didn't bother to know or denied what they saw. Buyers and sellers alike will benefit from knowing the recently sold prices of comparable properties. Selling prices are retreating and asking prices for the majority of active listings aren't in line with selling prices. What any unit sold for in 2023 is probably not a good indication of what that unit might sell for now. Homework pays off, people.

PSA for current condo sellers. Please check your MLS listings to make sure your condo name is correctly entered into the MLS. There are eleven current condo listings with incorrect or missing condo names. This means that all prospective buyers who have saved searches with your condo name included have not gotten an alert that your unit is for sale. I was reminded of this last week when I was checking my saved search of all short-term rental oceanfront condos in our market. I was aware of a new listing but it wasn't included in my results. I checked and, sure enough, the condo name, in this case, was misspelled excluding it from search results. Several of the other offenders appear to be agents unfamiliar with our MLS who don't know how to plug in the correct condo name. This ain't rocket dentistry level complexity but then again the real estate licensing process does not screen for ability or aptitude for learning and sometimes rewards incompetence with sheer blind luck. Don't be a victim of your agent's mistakes and oversight and proofread your listing for errors. 

How about accuracy of your condo fees? There are a few condo listings with grossly misstated condo fees which will ultimately threaten an executed contract when the truth becomes known before closing. Don't expect your buyer to be cool with $1100 a month condo fees when he's expecting $650 as advertised in the MLS at the time he wrote his offer.

"However beautiful the strategy, you should occasionally look at the results." _Winston Churchill

Unintended Consequences

After producing a bumper crop earlier this summer, my Thai chilis have pushed out a new set of leaves and blooms and are well into the second crop of this year's season.

Some of the unintended consequences of the new rules have shown themselves already. How about the person who's been talking to a neighbor about buying their condo whenever they're ready to sell but who goes to look at a different investment property nearby. The agent who shows them the investment property has them sign a buyer broker agreement for six months and leaves the property address/description blank since they expect to be looking at various types of investment properties in the coming weeks. One day after signing the agreement the neighbor calls and says he's ready to sell the condo. There is now a contract in place that obligates the buyer to pay the agent that showed them the other property even though they aren't and won't be involved in the neighbor's sale at all.      

Scenario 2: Buyer is looking to upsize from the condo they currently own. They meet with an agent and sign a BBA for one month and begin looking at units. Shortly after beginning their search, a bigger unit in their complex that is perfect for them goes under contract and they have an opportunity to exercise their first right of refusal and take over the contract for that unit. Just like the other example, these people are now obligated to pay the agent with whom they were looking at other buildings even though the agent is not and won't be involved in the first right purchase.

In both these scenarios even though the buyers are contractually obligated to pay the agent per the letter of the agreement, if I was the agent, I would not expect to be paid nor would I accept payment. Unfortunately, not all agents would feel that way. These scenarios should serve to encourage buyers to select their buyer's agent with care. Being able to trust your agent is probably going to be more important than which agent will agree to the lowest pay. If I didn't feel like I could trust an agent for whatever reason, I would not be inclined to sign an exclusivity agreement with them. The new agreements were drafted for Realtors and they are heavily slanted in the Realtors' favor. Before signing I would spend enough time talking to a prospective buyer's agent to get a feel for how fair I could expect them to be and whether I feel like I can trust them to look out for my best interest. I'm willing to pay the agent that passes that test more than the guy who can't pass the gut check of a short conversation. Be smart, y'all, and exercise caution when price shopping for a buyer's agent. They are not created equally nor will they represent you equally well. Any agent who presents a BBA asking for a percentage plus an extra dollar amount for some random "fee" has just failed the gut check.

It's been two weeks since the new rules went into effect and I'm seeing lots of listings marked as "No" seller concessions. I wonder if the listing agents are charging more for the listing side commission and advising sellers that they don't have to offer a buyer's broker anything. Agreeing to pay 4% to a listing broker and zero to buyer's broker seems like a deal compared to the pre-August 17 range of 5% to 6% split between selling and listing brokers. However, when every offer arrives with a request for a 2 to 3% concession to cover the buyer's broker's fee then the 4% turns out to be not so great a deal. One other thing I'm noticing is that these "no seller concession" listings aren't priced any lower than those who are offering concessions. 

Sellers don't be deceived by larcenous listing agents trying to profit from the new rules and the public's misunderstanding of the same. Choosing to advertise that you aren't willing to offer a concession is adding unnecessary friction to the selling process. Better to leave the seller concession field in the MLS blank rather than chase away buyers who are obligated to pay their agent and who take your "No seller concession" at face value.

“Sufficiently advanced ignorance is indistinguishable from malice.” _unknown

Summer of Love, 55 Years Later

Tracks of hatchling turtles who scrambled for the ocean for their first swim after hatching one night this week in south Cocoa Beach.

I could never have imagined during the summer of love, that 55 years in the future, the same August weekend as Woodstock, I'd be talking about being required to have a signed compensation agreement with a buyer before I am allowed to show them a house, yet here we are. We can walk into a store in some states and buy a joint but we can't show a house to a buyer without said agreement. Progress does not move in a linear or even sensical fashion. Today, August 17, 2024, is D-Day for implementation of the new rules relating to the National Association of Realtors settlement. It is already, shall we say, interesting.

The inventory of properties for sale in Cocoa Beach and Cape Canaveral has been shrinking since peaking in May. There are about 13% fewer properties for sale this Woodstock weekend than there were three months ago. There are currently 268 condo and townhome units for sale on the MLS and 47 single-family homes. Median asking price for the condos is $394,000 and for the single family homes, $962,000. Median time on market for condos currently listed is 94 days and for SF homes, 83 days. Median condo fee for the listed units is $650 monthly. Of the 240 condo listings older than two weeks, 158 have dropped the price at least once and there are six listings that have been optimistically listed for over a year without a price drop. Only 22 units have gone under contract so far in August.

There were a total of 50 closed condo and townhome units in the two cities in July with a median selling price of $390,000 and a median time on market of 43 days with a median condo fee of $600 monthly. Contrast that 43 days on market with the median of 94 for the remaining inventory and it's obvious that properly-priced new listings are stealing the bulk of the buyers from the older listings with overly optimistic sellers who are clinging to prices that the market is rejecting. Highest selling price was $975,000 for a 2419 square foot, 7th floor direct ocean unit at The Constellation in south Cocoa Beach. Close behind was a 9th floor corner, direct ocean Stonewood downtown Cocoa Beach with 2170 square feet that closed for $950,000.

In July there were seven single family homes closed with a median selling price of $807,000 and a median time on market of 95 days. Only one home sold for more than $815,000.

From this point forward, no buyer's broker compensation is displayed in the MLS but there is a new Y/N field for "seller concessions". On this morning's hotsheet I noticed four listings that are advertised as "No" seller concessions. That means that buyers of these listings will either have to pay their buyer's broker out of pocket or their offers to the sellers will have to include a request for a concession to cover some or all of the fee they agreed to pay their agent. The sellers who are advertising 'No" concessions can be assumed to be disinclined to agree to one. Buyer's agents are about to become seen as an impediment to a sale for the listings that are unwilling to offer a concession. I can easily see scenarios where a seller counters an offer accepting the price and terms but rejecting the concession and, by doing so, painting the buyer's broker's fee as the sole barrier to a sale. I knew this was going to be interesting but I didn't count on seeing many "no seller concession" listings so soon. I welcome your stories which are sure to follow. My email is at the top of the page. Good luck out there. Things are different now.

"The Woodstock Music and Art Festival will surely go down in history as a mass event of great and positive significance in the life of the country ... That this many young people could assemble so peaceably and with such good humor in a mile-square area ... speaks volumes about their dedication to the ideal of respect for the dignity of the individual ... In a nation beset with a crescendo of violence, this is a vibrantly hopeful sign. If violence is infectious, so, happily, is nonviolence." _Michael Lang, Boston Globe

Buyer Beware

We are three weeks away from new rules going into effect as a result of the NAR settlement. I have commented on these changes in previous posts and wanted to discuss in more detail the two changes that will have the biggest impact.

(1) Buyer's broker compensation will no longer be displayed in the MLS after August 17. The way it works now is that sellers offer compensation to the buyer's broker (through the listing broker) and that is displayed in the MLS listing and is folded into the asking price. Usually, but not always, the rate offered the buyer's broker is half the total commission the seller has agreed to pay to their listing broker. I have seen offerings as low as a few hundred dollars to as high as 5% to the buyer's broker. The majority of listing right now in our MLS are offering between 2% and 2.5%. Historically in our market, buyers agents represented their clients, found and closed on a property and were paid at closing whatever the seller's broker was offering in the MLS. Sometimes the agent would get 3% and sometimes much less. Agents usually just accepted whatever was offered and it worked out overall, good pay on some sales, not so good on others.

As of August 17, agents will no longer see on the listing what compensation, if any, is being offered and will have to find out from each listing agent what they can expect from the seller at closing. I think we will probably begin including buyer's broker compensation as a written part of the offer. This will make the buyer's agent's commission an inconvenient but integral part of the negotiating process which brings us to the second big change.

(2) Agents will, after August 17, be required to have a signed buyer broker agreement BEFORE viewing any property outlining compensation due the buyer's broker. The agreement will define exactly what the buyer will owe their agent/broker. The agreement allows for that amount to be paid partially or fully by the seller. This (below) is the exact wording concerning that in our new Buyer Broker Agreements as provided by our local Realtor association:

• Compensation received by Broker, if any, from an owner or owner’s broker for services rendered to Consumer will reduce any amount owed by Consumer per this paragraph.  

If a buyer's agent has an agreement with their client for more pay than the seller is offering, the buyer can either negotiate for a seller concession large enough to cover the commission or they will have to pay their broker the difference at closing. This is going to become awkward very quickly.

Imagine negotiating with a seller to within a few thousand dollars and knowing that your agent's pay is the only thing keeping you and seller from agreement. For instance; a buyer's top number they're willing to pay for a certain property is $500,000 and their agent has presented an offer for $500,000 with a request for a 3% concession from the seller to cover the agent's pay. The seller tells their agent they will accept the $500,000 but with no concessions, take it or leave it and figure out the commission however it pleases the buyer. The buyer can either walk away or take the $500,000 and pay their agent another $15,000 out of pocket or possibly negotiate a lower rate with their agent if they'll even consider it. 

Note that the commission has always been built into the price but it wasn't part of the negotiations between the buyer and seller. I have done many deals where I or I and the other agent agreed between ourselves to accept lower pay to bridge the gap and make a deal work out. Those agreements between agents to the benefit of their clients will be less likely to happen now and I suspect more of these close deals will just fail to come to agreement.

There is some interesting wording in the new agreement concerning exactly when a buyer owes their broker. Check out the highlighted phrases:

If using this agreement form, buyers will owe their broker once they contract to purchase and will still owe if they default on that contract and never close. I'd be very hesitant to sign an agreement with this wording and, if I did, I'd be sure to at least negotiate a reasonable rate. Notice in the last paragraph that the agent can select either a percentage or an amount OR a percentage or amount PLUS an additional amount. That last blank is tailormade for junk fees. Buyer's agents are going to be sliding this agreement across the desk to their clients for signatures agreeing to pay the agent a percentage PLUS their "non-negotiable" transaction or brokerage fee which is a fancy way to spell junk. If there is a number in that last blank on the buyer brokerage agreement you signed, you agreed to be robbed.

I would advise buyers to carefully read whatever agreement their agent presents them with and to question anything they don't understand. There is no set commission or rate. It's all negotiable. If you think $1000 is plenty for your agent for the transaction you hope to have, ask for it. There is little reason to agree to pay them 3% plus $395 just because they asked for it and told you it wasn't negotiable. I might consider paying the $395 junk fee if they'd drop the percentage by a point or two.

It's going to be wild and probably not a lot of fun for buyers and their agents. Agents in our market have always gotten occasional calls from people on vacation wanting to see properties while they're here. That's part of real estate in a vacation destination. Now those folks are going to have to have a discussion about the agent's pay and sign an agreement to those terms before they can get in to see that little beach condo that caught their eye. Awkward. Best of luck to everyone on all three sides. We are entering uncharted waters.

"Against profitability, morality is overmatched." _Jay Busbee