Inventory Ramping Up - Sales Slowing

This little guy became disoriented during the last hurricane and when I approached him afterwards he walked over and hopped into my hand like I was a long lost friend. I took him back to the dunes where the rest of his family hangs out and hopefully he is still among those happily munching on my sweet potatoes and other plants that were not originally planted there for the marsh rabbits' culinary pleasure. However, I'm happy they enjoy them and will be planting new ones shortly.

Inventory in Cocoa Beach and Cape Canaveral has increased by about 11% in the two weeks since December 31 and we now have the highest number of condo and townhome units for sale since 2011. There have been 50 new condo and townhome listings added so far in January during which period only 15 units went under contract. Sixty five units have been for sale for six months or longer, most of them with multiple price drops that so far haven't produced a buyer. In addition to the highest inventory in fourteen years and rising rapidly, we had the lowest number of sales in fifteen years last year. Whether either of these trends persist into the year is unknown but the chart below illustrates that these trends have been ongoing for the last four years. 

Sellers take note. There are more of you competing for fewer buyers who are staring at once-again rising mortgage rates and skyrocketing condo fees and insurance. A third of the condo units currently for sale have monthly fees of $800 or more with sixty of them at $900 or more. While few were paying attention mortgage rates climbed almost a full point since September and are right at 7% at the moment for a 30 year fixed rate loan. If I was selling right now I'd not be expecting to get as much as I would have last year or the year before and if I was buying I'd be in no rush to offer unless I found the perfect unit at a price I liked. There are obviously exceptions to this but it's clear that this is no longer a seller's market. Conduct yourselves accordingly.

Pray for warmer weather, y'all. Floridians are suffering and many are woefully underequipped with cold weather clothing. Welcome early snowbirds and go ahead and laugh. The pain is real for us.

"If you don't remember what you said, it may be a sign you didn't say it." _Newt Gingrich

2024 - The Wrap

The year 2024 was eventful for real estate in Cocoa Beach. We began the year with the National Association of Realtors embroiled in a lawsuit over commission collusion in another state whose settlement would affect Realtors nationwide when new rules went into effect on August 17. On that date, it became mandatory for buyers to sign a Buyer's Brokerage Agreement with their buyer's agent before stepping foot in a property. That agreement must designate either a specific property, a type of property or an area, a time period and, controversially, how much the buyer will owe their agent upon closing of a property. BBAs are not common in our market and buyer reactions have been at times unsettling. There were buyers previously happy with and trusting of their agent who refused to sign the new agreements or modified the language because of their newfound distrust of the same agent for presuming to ask for a signature on a required document. Several of us found out how some of our clients really felt about us and it wasn't encouraging. Thanks to those who never wavered in their trust knowing we'd be fair regardless, just as we always were, at least those of us who are deserving of that trust.

Many agents saw the new BBA requirement as an opportunity to get a raise to 3% on every deal when those same agents had been happy to walk away with 2% to 2.5% prior to August 17. I would suggest that buyers tread carefully when signing these agreements especially those asking for high commission rates and especially those asking for a transaction fee in addition to the commission. There are very few situations where a transaction fee is justified. When you are presented with a BBA it is your right to negotiate the commission rate and your duty to refuse the transaction fee. The transaction fee is an attempt to pick your pocket and should immediately disqualify that agent from consideration. Don't be robbed. For the record, most sellers are still offering to pay the buyer's broker but in many cases it must be asked for as a concession when making an offer. A buyer will only be on the hook for the difference in what the seller is willing to pay and what the buyer agreed to pay their agent in the BBA. Buyers, don't agree to a high commission on your BBA unless you're willing to cough up some extra cash at closing to make up the difference.

Another big story this year was the impending deadline for condo milestone inspections and structural integrity reserve study. That deadline is today, December 31, 2024. We look to have several condos in our area who are going to miss the deadline. Those that have complied have seen their condo fees rise to fund the new reserve account which includes concrete repairs, something very few condos have ever reserved for. As of right now, the median condo fee of the units for sale is $650 monthly and likely to continue to increase. Buyers are advised to review the condo budget closely before committing to purchase a unit. Those associations who haven't implemented their new reserve funding will likely have a nasty surprise for the owners when they come into compliance.

We began 2024 with an inventory of 254 condo and townhome units and 31 single family homes for sale in Cocoa Beach and Cape Canaveral. Today, on the last day of 2024, the Cocoa Beach MLS is showing 298 condo and townhome units offered and 48 single family homes. Median time on market for the condos for sale is 95 days and for the homes, 184 days.

There have been 102 closed single family home sales during the year. Median selling price was $791,000 and only ten houses closed for less than a half million in the year. Median time to sell was 67 days and 45% of the sales were cash deals.

Condominiums, as always, had much higher sales activity than houses as there are many times the number of condos as houses in our two cities. There were a total of 501 closed sales during 2024 as of today. That number will creep up slightly over the next couple of weeks as tardy listing agents get around to closing their listings. It will still be the lowest number of condo sales in Cocoa Beach and Cape Canaveral since 2010. A little over 54% of the condo sales were cash deals. That percentage will probably increase this coming year with more stringent scrutiny of condo associations by lenders for condo loans. Here are condo unit sales numbers for the last twenty years.

There were only eight sales of condos in 2024 for a million dollars or more. Median selling price was $355,000 and median time on market was 72 days. Sixty units sold for $200,000 or less.

Predictions for 2025: I expect condo loans to become more difficult to obtain. On a condo sale last month the lender's underwriter required a copy of the last reserve study before he'd approve. This was an association that was already funding reserves at 21% of the total budget, over twice Fannie Mae's minimum requirement. Florida condo loans are already some of the more difficult mortgages to qualify for and any new requirements like this are going to add even more condo associations to the list of those who will not pass muster for a mortgage.

Speaking of not passing muster, some associations have stopped filling out lender condo questionnaires for prospective buyers. Without the completed and signed questionnaire, units in those building effectively become cash only sales. In the associations' defense, the new questionnaires have some very vague questions about the respondent's awareness of structural issues. Signing one's name to one of these documents could encumber the respondent with substantial liability which is why some association attorneys are advising the association not to fill them out.

I would advise any prospective condo buyers to carefully review condo docs including budget and to give more than a passing glance at the overall apparent condition of the building. You don't have to be an engineer to notice deferred maintenance. Buildings with obvious issues will have to be repaired and the owners will be the ones paying for it. Be aware that condo fees are likely to continue increasing although hopefully at a slower rate than this year's increases. Master insurance policies are becoming more expensive so it's probably prudent to expect fees to rise again to accommodate 2025's probably more-expensive renewal premium.

On the positive side, there are lots of new things happening in Cocoa Beach. Construction is underway on the new Westin Cocoa Beach on the 15 acre oceanfront site of the old Holiday Inn. The food court on the site of the old Yen Yens downtown is well underway and The Surf oceanfront luxury condo downtown has begun closings. The new City Hall downtown is close to completion and there are several smaller projects either under construction or soon to break ground. Cocoa Beach is changing but we're still a small friendly beach town with the same population that we had in 1970, 12,000 mostly happy souls, probably over half of them surfers. We're a good bunch and welcome our new residents.

I found a note today I made in the 90s about the surf wax graffiti on the seawall at 14th St. Here are a few choice specimens:

• Chad Can't Surf
• Eric Shreds...Lettuce ("lettuce" was added days after the original appeared)
• Smoke a Fatty

We lost one of the 14th St. crew this year and he'd be paddling out today for his annual end of the year surf, regardless the weather. RIP Dennis.

"Coach, you can play me or not play me but I'm only here for four years and then I've got things to do with my life." _Pat Tillman to his college football coach upon being told that freshmen players usually didn't play in their first year

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