Sunday, October 22, 2006

Back to Basics

In our condo market, most activity has been bunched at the low end of the price scale. For the first 22 days of October, out of 10 closed condo sales on our MLS, only one was for more than $330,000. It closed at $490,000. There continue to be closings of brand-new high-end condos but they are not showing up in our MLS stats because only those that were flipped show in those numbers and flips have gone the way of the pterodactyl.

For the last 30 days, we have had 22 MLS-listed condos and townhomes close. Current total "for sale" inventory is 1014 units. My paper napkin math tells me that, at this rate, we have a 46 month supply. Digging a little deeper into the numbers we see 203 of those listed units over $500,000. There were 2 closings in that price range in the last 30 days, so, our activity is obviously lopsided. This snapshot absorption rate is somewhat misleading as September through December are historically our slowest sales months although it is not good news for sellers hoping to cash out before the end of the year. Until the bulk of our winter guests begin arriving in early 2007 expect to have major negotiating power as a buyer.

The cheapest oceanfront condo I can find today in our MLS is a 1 bedroom unit at the Saturn in Cocoa Beach with a side ocean view for $169,900. There are several dozen direct ocean units in the $300-$350,000 range including one 2nd-floor, 3 bedroom direct ocean unit in south Cocoa Beach for $349,000. I find 14 units listed for over $1 million with the peak represented by a 4617 sq.ft. unit in Cape Canaveral for $2,750,000.

I'm seeing more and more buyer's agent bonuses and higher commissions being offered out by sellers. Their intent is to somehow entice agents to favor their properties over others. Makes more sense to me to just lower the price, but, maybe a seller's pride can be left more intact by getting closer to their mental target price and paying higher costs. As a buyer, why not ask your agent for that bonus at the same time you're asking the seller for concessions. You are the one bringing the money after all, so, in effect, you have paid that bonus buried in the selling price even though your agent may not have disclosed to you up front that she was receiving a bonus. Our MLS, for some reason, hides the bonus amount on the customer printouts. Read my previous post on this subject here.

If you can, try making it to the beach soon. The water is still warm, the mullet run is still happening and the beaches are deserted most days this time of year.

Here's a snook from the surf on October 25.

Thursday, October 05, 2006

Deal, no deal?

Depends on the deal. Brand-new, over $500,000 condo? The answer is, no deal. Existing, priced-right condo below $500,000? It appears that, for now, the answer is likely to be, we have a deal. As I mentioned in my last post, sales activity has picked up. Our office continues to be busy with sales of existing condos and single-family homes. New construction appears to be pretty much dead in the water, although a few units at drastically-reduced prices have moved recently. How about a brand new, 2500 sq.ft. never-lived-in, 4 bedroom 2.5 bath townhouse with 2 car garage in Cape Canaveral for $382,000? Sold in September. The direct ocean 3 bedroom, 1753 sq.ft. unit in south Cocoa Beach that I mentioned in an earlier post for $399,900 sold for $375,000. Portside prices have started creeping back up as almost all the units have closed. The cheapest recorded resales in September were $185,000 for a 2 bedroom and $214,000 for a 3 bedroom.

There have been some remarkable price reductions since October 1. Most notable has been the reduction of four unsold units at the not-yet-started Cocoa Cabanas condo. Two units have been dropped from $985,000 to $750,000 and 2 others from $985,000 to $775,000. A beautiful 2000 sq.ft. direct ocean corner unit at Wavecrest next door has been reduced from an original price of $630,000 to $489,000 this morning. One motivated investor across the street at Magnolia Bay is offering a new boat to buyers. He probably needs an edge with a total of 25 other investor-owned units in the complex offered on the MLS. These sellers can glimpse the likely future by looking down the street to the recently-completed Crescent Palms where 11 units are still active on the MLS out of a total of 15. A little pain is being felt there.

Magnolia Bay

I was reminded of a nasty little secret about pre-construction purchases yesterday by a local TV news story. Seems that some pre-construction buyers of homes in a new Orlando neighborhood are having trouble getting mortgages because the appraisals for their new homes are coming in below the purchase price. Usually in a Florida real estate deal with a FAR or FAR/BAR contract, a buyer getting a mortgage would make her purchase contingent on acquiring a mortgage. Should the property fail to appraise making the mortgage unobtainable, the buyer can cancel the contract and have her deposit returned. Alternatively, the seller can reduce the purchase price to the appraised value and the deal can proceed. Unfortunately for the Orlando buyers, they used a developer's contract, which is common in pre-construction, and they have no financing contingency. If they cannot close, the developer can keep their deposits. This was never an issue in the rapidly appreciating years of the recent past but it is now. What happens when that new condo that Investor X reserved for $600,000 appraises for $525,000? Does he walk from his $60,000 deposit or does he go ahead and close and take the $75,000 immediate paper loss? Not exactly a win/win offering. It's not even a good deal for the developer who pockets the deposit. He doesn't want to be left with a handful of forfeited deposits and unsold, under-appraised units.

Among the scores of offered properties, some good deals exist. Those of you looking to buy but afraid of further price erosion should approach your search with the intention of finding those properties that are already priced in anticipation of more depreciation. These properties exist. They're just buried among the hundreds of optimistically-priced units that are competing for attention.

Here are our current stats. Most of the closed sales of condos in September were older, existing units. The newer units listed on the MLS are, for the most part, assignment of contract sales by investors and very few of those are moving.

MLS stats from Cocoa Beach and Cape Canaveral

Active condos for sale, all prices________1029
___condos over $500,000_____________214

Single family homes, all prices__________145

Closed condos in Sept 2006_____________36
Closed single-family Sept________________8

Snook are being caught at the Port, the Inlet and the beaches when the surf is calm enough. I had a wonderful fillet last weekend that a friend was kind enough to share. If you get a chance, get out there and try for one of these tasty fish when the ocean permits.