Thursday, November 29, 2007

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

Saturday, November 24, 2007

Dubious Distinction of the Day

We're Number One

According to the National Association of Realtors, Brevard County had the largest percentage drop in housing prices in the last quarter of any major market in the United States. At the same time, the rate of sales for condos has been in an uptrend since July in Cocoa Beach and Cape Canaveral. For the period of July through October, the MLS shows 11 more sales in 2007 than in 2006; 138 this year compared to 127 last year. The two stats are obviously directly related. This time last year there was much more denial among sellers about their property
values, prices were too high for the most part and the buyers weren't playing. As the reality check has progressed and prices have come down, more buyers have eased back into the market. I expect this trend to continue, but, as always, I could be wrong. I am reminded of a quote by John Kenneth Galbraith, "The only function of economic forecasting is to make astrology respectable."

The asking prices are still all over the map. This morning I can find a direct ocean, 2/2 with 1153 sq.ft. in a 34 year-old building for $450,000 and a 3/2.5 with 2100 sq.ft. in an 11 year-old building for only $9000 more. Care to guess which one will sell first?

Smoking deal of the week: one year old, 3400 sq.ft. direct ocean penthouse with rooftop deck for $725,000. This one is bank-owned. Somebody at the bank obviously gets it and wants this one off the books.

MLS inventory Nov. 24, 2007 Cocoa Beach & Cape Canaveral

over $500,000_______117

Single family homes___160
over $500,000________70

If you're in the area this weekend, try to make it to the art festival in downtown Cocoa Beach, Saturday and Sunday. Here's this year's poster and t-shirt design by Bruce Reynolds. I'm off to see the show.

Tuesday, November 13, 2007

Foreclosures exceed sales in October

Florida Today reports that foreclosures in Brevard County hit 590 in October, a month in which the MLS reported 442 residential sales. This explains the willingness we are seeing from some lenders in accepting short sales on troubled properties.

"Victory goes to the player who makes the next-to-last mistake."
___ Chessmaster Savielly Grigorievitch Tartakower

Thursday, November 01, 2007

Calling the Bottom

One of my dad's cows and a big fan of the blog listening to my observations on the real estate market and contemplating the timing of her next purchase now that she can no longer get a stated income mortgage.

Question: If the bottom happens and no one is around to notice, did a bottom really happen? Calling the bottom in this real estate cycle has been an embarrassing game for those who have ventured a call so far. The National Association of Realtors perhaps has the most egg on it's face with it's call in November 2006 that the housing market was "on the road to recovery", but, they have plenty of red-faced company. For buyers and sellers of real estate, it would be prudent to take any call of bottom, regardless of the source, with a grain of salt.

As I've mentioned in the past, no one is going to ring a bell when the bottom is reached. To further complicate timing is the fact that it will not occur at the same time for all properties. We have already seen sales that may represent the bottom for specific unit types in some condos. For instance, it appears that my call a year ago of the bottom in 3 bedroom non-riverfront Harbor Isles units at $220,000 was accurate. The lowest price for currently-listed 3 bedroom units there is $265,000 and the lowest selling price since the $220,000 sale was $265,000. Buyers who passed on that unit expecting further price deterioration were wrong. What does this mean for buyers who are afraid of catching a falling knife? Research, research, research. Without market knowledge, one can't hope to recognize a price that is ahead of the declining curve.

As the broad market continues to decline, I am seeing deals like that Harbor Isles sale a year ago, sales at prices that likely will represent the bottom in those particular unit types and buildings. Remember that every seller's situation is different. Some have no pressure to sell and are content to wait out the downturn while others are motivated to sell at whatever price the market will yield. These motivated sellers will reach their capitulation point at different times. If you're buying, be ready to move and have the market knowledge to recognize a deal when it it presents itself, or have access to someone like myself who can identify the candidates as they appear. As I said a year ago, "If you'd like a nice existing condo, be looking now and be ready to pounce when that isolated, motivated seller drops his price to the can't-refuse level."

Exhibit A for this week; 2 year old, 2293 sq.ft., 3 bedroom 3 bath, direct river condo on the mile-wide part of the Banana River in south Cocoa Beach across the street from the ocean. Sold new in December 2005 for $699,000. Offered for $445,000 as a short sale and under contract as of yesterday.

I'll leave you with a recent windswept day south of the condos in Cocoa Beach.

“I don’t want to be too sophisticated here, but 2007 is going to suck, all 12 months of the calendar year.'’ Don Tomnitz, CEO of D.R. Horton Homebuilders, March 2007