Easter Egg in the Housing Bill

Other than the colorful boiled eggs hidden for children at Easter, an easter egg can also be a hidden message in software, DVDs, video games and even books. For instance, to instantly force a win in Windows solitaire, simply press Alt + Shift + 2. Voila, you win. For owners of real estate who sell their primary residence after December 31 this year, the easter egg waiting for them is the new ratio formula for pro-rating the $250,000 per person capital gains exclusion. Until the end of this year, the rule is that one needs to have lived in his home for at least two out of the last five years to qualify for a $250,000 ($500,000 for married couples) capital gains exclusion on the profit in the home.

Four pages from the end of the 694 page, well-intentioned but mainly misguided "Housing and Economic Recovery Act" passed into law this week, the bomb begins with the wording "Subsection (b) of section 121 of the Internal Revenue Code of 1986 (relating to limitations) is amended by adding at the end the following new paragraph:"

What follows, in summary, allows for the amount of tax exclusion to be proportional to the number of days the home was "primary residence" divided by the days the home has been owned. For example, if I've owned a property for the last five years and that property has been my primary residence for the last two years, the impact of the date of sale for me, a married man, will be;

A: sold by Dec. 31, 2008 - up to $500,000 of capital gains will be tax-free

B: sold after Dec. 31, 2008 - up to $200,000 of capital gains will be tax-free

The reality; selling after the last day of this year could cost me up to $45,000 in taxes depending on my total profit from the sale. This is only my interpretation of the wording. I am just a well-read, way-too-involved real estate guy. If you are in a position to be affected by this change, do not trust my take but get thyself to an accountant, tax lawyer or other qualified person and get professional advice. You may profit from notching up your efforts to get your property closed before New Years. The sad reality for most people who have owned for less than five years is that there will likely be no capital gains to protect. Thanks to Dan Green of the Mortgage Reports Blog for bringing the egg to my attention.

July has ended and the sales, as recorded by today, August 2nd, fell behind last July's tepid total. We had a total of 42 closed MLS-listed, residential properties in Cocoa Beach and Cape Canaveral, 11 single-family homes and 31 condos. The bright spot in this otherwise dull month was the view from the buyers' side of the closing table. Someone stole a 4th floor River Bend, 2292 sq.ft. unit for $265,000. A 3250 sq.ft. brand new 5/3.5 canal-front home went for $580,000, less than you could buy the land and build it for. Another older 3/2 canal-front home with dock and boat lift off Minutemen Cswy. sold for $295,000. And, in what will likely go down as the smoking deal of the year, I represented the buyers of a direct-river estate on three quarters of an acre of direct wide open river with over 130' of waterfront with dock, boat lift and massive riverside tiki bar (pictured above) with lush mature landscaping, across the street from the beach. Listed last year for $1.9 million and closed in July for $670,000.

I count 135 condo listings this morning in the Cocoa Beach and Cape Canaveral MLS that have been listed for longer than a year. Add the other listings whose "days on market" number has been manipulated and the newer but severely over-priced ones and we have a lot of sellers who have yet to face the reality of the changed market. I can't say this enough; if your neighbor just sold his identical unit for $100,000 less than you're asking, your unit is not really for sale. His motivations for selling DO affect your property's value whether you share his circumstances or not. Either face that reality and price your property accordingly or pull the For Sale sign out of the yard. The stress of waiting for that rare buyer who is willing to overpay for your place is not worth it.

I would also offer another piece of advice. Choosing to get a renter while waiting for the market recovery has, so far, been an expensive decision. With the exception of a few weekly rental oceanfront condos, almost no property purchased in the last five years can generate enough rent to cover expenses. Add the chances of repairs, assessments, depreciation and lost opportunity and the decision to rent could cost far more than just cutting the price now to a level that will generate a sale. I feel for you if you're in this position but you need to rationally evaluate your choices. The right decision is often the more difficult one.

Until next post, I'm enjoying the glorious sunrises of the last two weeks and the daily afternoon thunderstorms. Cocoa Beach has been exceptionally beautiful this summer and we're approaching my favorite time of year, that magic period between Labor Day and Christmas when the weather has cooled, the fish are biting, the surf is good and the roads and beaches are deserted. If you've never experienced our town during this time, plan a visit. Rentals are discounted and you'll have the run of the place along with a few locals.

Give me things that don't get lost.
Like a coin that won't get tossed.
_______Neil Young's "Old Man"

Surprise, surprise

Here we go, again. After the passage of Amendment One, the property tax relief bill supported by the Florida Association of Realtors among others, there was wide speculation that individual cities and counties would increase millage rates to make up for the lost revenue. Orlando appears to be among the first to float that idea. In last Tuesday's Council meeting the majority of members stated their support for a 21% increase in the millage rate to make up for the $30 million budget gap that resulted from the passage of Amendment 1. Most of us who opposed Amendment 1 did so because we doubted the willingness or ability of the bureaucracy to reduce spending and expected offsetting higher millage rates in the wake of successful passage. I don't have a solution but slashing taxes at the state level without a solution for replacing the revenue doesn't seem well thought out.

Now, the same groups are pushing for support of Amendment 5 or, as they are calling it, "Amendment 1 on steroids". As before, the Florida Association of Realtors supports slashing property taxes because they believe that will increase sales activity, which is, naturally, their primary concern. And, as before, they have no solution for replacing the lost revenue other than a one cent increase in the sales tax which will still leave an $8 billion with a "B" shortfall. As a dues paying member of both the Florida Association of Realtors and the National Association of Realtors, I am embarrassed by their wasteful, self-serving campaigns ranging from NAR spending $30 million in 2006 and 2007 to tell the public that "Now is a great time to buy" and the current $1 million campaign by FAR to entice the public into supporting a bill that is likely to backfire just like Amendment 1 is now beginning to do. For the record, if it's not clear from the above, I oppose this half-baked idea to reduce property taxes. I support lower taxes but this just ain't the solution.

"Prices have stabilized and are starting to rise."
___November 2006 - National Association of Realtors ad, NY Times



"I triple guarantee you, there are no American soldiers in Baghdad."

The Sweet Smell of Summer

One of the sweet smells of summer in Cocoa Beach, frangipani (aka plumeria).

As of today, the 24th of July, we appear to be on track to closely mirror last year's sales for the month of July in Cocoa Beach and Cape Canaveral. For the last five years, sales have peaked between April and June and then trended down to the lows of the year between October and January. Typically the number of closings falls off the cliff in October reflecting September's abrupt drop in sales activity and doesn't recover until February. I expect the same for this year.

Recent sales of note include a 4th floor, direct river 2/2 at Four Seasons in Cocoa Beach for $185,000 and a 5th floor, direct river 2/2 at Sunset Harbor that sold for $165,000. Best oceanfront deal of the month was a 4th floor, north corner 3/2 Ambassador Shores unit that I was able to negotiate on behalf of a buyer for $235,000. Unfortunately, our contract was taken away by another owner in the first right of refusal process that is in place at that building. We have had two $500,000+ units close so far this month, one of them a new unit at Meridian on the ocean. Of the 21 MLS-listed condos to close so far this year for over a half million dollars, nine have been at Meridian. I hope the buyers agents are doing the right thing and disclosing in advance and sharing with their buyers the excessive commissions being paid to them by the developer. Long-time readers of this blog know my stance on agent incentives. The practice reeks like shrimp heads in a hot dumpster. If you never read my first posts on the subject you can read them here.

Single-family home sales have been tepid with only three closed sales so far this month. One was a small but very cute 2/1 home with a pool one block from the ocean and 1/2 block from the river in south Cocoa Beach that went for $195,000. There are pending deals set to close soon that will cause some teeth-gnashing and rending of garments. I will report on them as they close.

As of yesterday, ten of the developer's auctioned units from the May 17 auction at Mystic Vistas in Cape Canaveral have been recorded on the property appraiser's site for prices ranging from $181,500 to $275,000. These were all new units from 1686 to 2059 sq.ft.

From Bankrate.com: "This week (July 17-23), 70 percent of the panelists believe mortgage rates will rise over the next 35 to 45 days."

MLS inventory July 24, 2008 Cocoa Beach & Cape Canaveral

Condos, all prices_____753
over $500,000________95 - 21 sold since New Year's Day
Single family homes___125
over $500,000_________44

For those of you waiting for an outstanding deal, the pickings are slim. There have been very few priced-right new listings in the last few months and the ones that have appeared have been quickly snapped up. Be ready to pounce if you want to steal something and don't rely on the tardy listings at some of the popular real estate web sites. Your buyer's agent, if she's good, is your best weapon for early notice of hot listings. Justify your low offers with comps and/or well articulated reasons for a better chance at success.


"Honesty is never seen sitting astride the fence."
_____________Lemuel K. Washburn

Whoa....Déjà Vu

As a buyer's agent I don't pursue listings and usually suggest another agent that I trust (it's a short list) for listing inquiries depending on the location of the property. I have made an exception for the building above. I have history in this landmark downtown Cocoa Beach location and thought that the connection I have with the property made for a harmonious fit. I owned a business that operated out of this building back in 1992, hence the déjà vu title (a quote from Neo, by the way). Since I moved a series of tenants including Munson Surfboards, Da Kine Diegos restaurant and, most recently, Beach Culture Surf Art have occupied the space. It picked up the Rick Piper mural across the front a few years back and is now for sale for the first time in years. For someone interested in a commercial property 2 blocks from the beach and walking distance from the two dozen or so restaurants and bars in downtown Cocoa Beach, this could be it. Offered for $199,900. Email me if you'd like to know more. If you'd even consider painting over the mural, it probably isn't for you.

"Every child is an artist. The problem is how to remain an artist once he grows up."
__________Pablo Picasso

July 14 Update

I grabbed the frame above from the Cocoa Beach Pier cam just a few minutes ago of a few guys catching the last few sets of the Hurricane Bertha swell.


MLS inventory July 14, 2008 Cocoa Beach & Cape Canaveral

Condos, all prices_____758
over $500,000________99 - 18 sold since New Year's Day
Single family homes___127
over $500,000_________47

Deals of note

New 1702 sq.ft., 3/2.5 Sea Spray townhome in Cape Canaveral,
______closed last week for $155,000

Third floor side ocean view Chateau 2/2 - weekly rentals
______closed for $215,000

Direct ocean 3/2, 1548 sq.ft. in a 4-unit building in south Cocoa Beach
______closed for $335,000

There's something happenin' here
What it is ain't exactly clear
________Stephen Stills

Back after a rest

Sorry for the long lag since the last post. I've been away for the last 10 days but a new post is forthcoming. The shot above was my sunrise this morning before a boat ride and a short plane trip back to Cocoa Beach. Some of you can probably guess where. Here's a hint. The shot below was taken a few minutes later of the last few sets of the Hurricane Bertha surf breaking out behind the house before the boat ride.



New post on the Cocoa Beach market by Monday.