Thursday, March 30, 2006

Does size matter?

Our little real estate company has become a thorn in the side of one of the Exxon Valdez-sized brokerages in our area. Like the Exxon Valdez, this behemoth cannot quickly change the course that worked so well in the heyday market of the last 5 years. Our little company, on the other hand, relies on flexibility and nimble moves to keep one step ahead in our rapidly-changing market. In fact, we recognize that this very ability is what gives our clients an edge in this difficult market. Now to the point of this essay. The Valdez (I'll just refer to the other brokerage as the Valdez) apparently is feeling threatened by our little company and has been telling sellers of real estate that they will be less-served by a smaller company, us, because we are small. Talk about reframing a bad situation (also known as spin). If this weren't so incorrect and possibly damaging to sellers of real estate it would be knee-slapping funny. My opinion, coming from the front line, is that, in this new market, sellers who hope to be successful need help from an involved agent with a company that knows it's clients, not a behemoth with hundreds of agents, thousands of listings and a captain snoring in his cabin. What worked last year is not working this year. Not being bound by ingrained procedures and bureaucracy, small firms can quickly change tactics to get results for their sellers while the Valdezes of the real estate world are still drafting memos and planning committee meetings to figure out why sales are down while the sharp edge of the reef draws ever nearer.

Whether you're selling property in Cocoa Beach or Culver City, you need to think seriously about the size of your real estate company. Does size matter? You bet. Small and nimble beats big and slow every time. Think David and Goliath.

Saturday, March 25, 2006

MLS statistics and inaccuracy

I had an unsettling experience this week with our MLS. I searched for all contingent and pending listings in Cocoa Beach and Cape Canaveral. I was shocked to see transactions from as long ago as June of 2003 still showing as not closed. One particular listing I knew had closed and sold again but was showing in the MLS as still pending. I reported this to the MLS and, Voila, it changed to closed that same day. Now anyone pulling stats from the system will have at least one sale in March 2006 that actually closed in April of 2005. Are there other inaccuracies in the system? Most certainly. Treat any numbers that are pulled from our local MLS as suspect. Having said that, here are some interesting numbers from our system. Accuracy should be questioned but the trend is clear, lots of new, high-end units and a tepid sales rate.

Cocoa Beach and Cape Canaveral Active Listings March 25, 2006

condos over $500,000________________233
condos all prices built in 2005 or later___250
closed since Jan. 1___________________84
total condos for sale_________________987

Note that 28 of those closed sales were of units that were contracted months ago in new complexes that are just now closing. There are also 75 other active condo units that show up in "residential" rather than "condo" that will bring the total number of active units for sale to 1062. Do some quick math and you get about a 20 month supply. That spring rebound that sellers and real estate people are hoping for had better hurry up. If you're waiting for the market to turn around, it would be prudent to prepare for a long wait. Sellers, if you can't afford to wait, it's time to get aggressive with your pricing. There are buyers out there and the successful sellers will be the ones who accept the changed market and price aggressively.

As always, there are exceptions, especially for sellers of special, one-of-a-kind properties. For everyone else, it's time to get real.

Wednesday, March 22, 2006

Alternative Universe

The real estate bubble is becoming America's most talked about impending disaster since Y2K. I suspect that the reality may be just as much of an anti-climax. I can't speak for other markets but I can speak with knowledge about the Cocoa Beach and Cape Canaveral market. Before the irrational exuberance of the recent condo boom, there was a normal market that consisted of primary residences and vacation homes. That market is still there and is much more healthy than the over-heated, investor-driven one that everyone is talking about. While pre-construction investors are sweating out the next drop in prices and losing sleep over impending closings, there are literally thousands of homeowners who are unconcerned with the short-term direction of property values. These are the ones who live here full time or those from out of town who use their beach places for vacations or get-aways. This is the alternative universe that is invisible to the bubble cult.

Are there problem areas in our market? Yes, most definitely. I've been cautioning about speculation in high-end condos for some time now. I suspect that there will be a lot of pain among the pre-construction investors in high-end condos this year. But at the same time, thousands of homeowners will be enjoying Cocoa Beach for it's beaches, surf, fishing, wildlife and all the other things that make this such a special place in the world. Will the speculators' departure affect this underlying market? Probably. All markets operate on supply and demand. A good analogy comes from Michael Kahn of Barron's. He said, "In the stock market, fuel is trading volume. Without volume, a price advance will soon slow down, if not stop and reverse. Momentum may keep trends going for a while, but sooner or later the market is going to require buyers to put real money where their collective mouths are and buy a lot of shares." This principle holds true in our real estate market. Fewer buyers means less or no price appreciation, at least until the current inventory is absorbed. I am already seeing drastic price reductions and expect more. During this changing time, there will be some outstanding deals to be had for those with the nerve to act.

While we wait out this next phase, I'll be enjoying all that Cocoa Beach has to offer. Hopefully, my next post will include a big fish or surf photo. Until then, as the t-shirt proclaims, "Life is good."

Wednesday, March 15, 2006

All work and no play....NOT

Well, all work and no play makes Larry a grumpy realtor. Managed to slip out offshore yesterday with a friend and chase the springtime cobia. This was our only fish but he was a bruiser. Cobia show up here every spring as they migrate northward. We zigzag around just off the beach looking for fish swimming on the surface or following manta rays. This was one of only 3 fish that we saw yesterday but luckily, he was hungry. The run will continue for a few weeks and then the nearshore action will slow down as the fish become scattered and congregate on offshore wrecks. Just another great benefit of living in Cocoa Beach.

Here is our dinner last night, grilled cobia steak and tiradito. I make the tiradito by slicing fresh, raw cobia or tripletail and arrange the slices on a serving dish. I then sprinkle with coarse sea salt, squeeze a lemon over all and top each slice with a cilantro leaf and a dot of hot sauce. Exquisite.

I'll return to our regularly scheduled real estate talk next time. In the meantime, get outside and enjoy this great spring weather.

Thursday, March 09, 2006

South Cocoa Beach gets a low-rise

The graph above shows total monthly closed MLS residential listings since Jan. 2004 on the left side to Feb. 2006 on the right. This includes condos and single-family homes. The numbers from the county show a different trend. Their records reflect all sales not just MLS listed properties and those numbers show no slowdown at all. I believe that can be explained by the number of new condo units that continue to close but were actually contracted as long as 2 years ago. If I were so inclined, I could paint a rosy picture of our market by using all sales rather than MLS-listed properties but that would be cheating, wouldn't it? The activity in our market remains very slow. I'm seeing more and more price reductions and inventory remains at a very high level. Action at Portside Villas resembles a game of chicken. Yesterday one seller reduced a 2 bedroom unit to a remarkable $215,900 while someone else posted a new listing for an identical unit at $269,900. Either someone didn't do their homework or this is a bad case of denial. There is one 1 bedroom unit offered for $179,900. At this level I think these units are a buy. Not a lot of downside risk at that price in a brand new 908 sq.ft. condo a short stroll from the beach. The pressure these sellers are under will ease after they close and there will be less incentive to dump units at these prices.

On a positive note, at least one developer gets the changing trend of our market. While million dollar high-rises go up on both sides with varying degrees of sales success, Tracy Dix has released plans to build 26 Key West style units in south Cocoa Beach with prices ranging from $349,000 to $449,000. Sizes range from 1438 to 1860 sq.ft. and all have a garage. This project will be on the site of the old trailer park tucked between the beach and the Banana River right next to Magnolia Bay. There are no new units even remotely close to these prices in that part of the beach. If you'd like more info about this project give me a shout at 321.917.5786 or email me. Artist rendering of this project below.

Crescent Beach Landings