Monday, December 28, 2009

The end is near

I hope all had a happy, safe time last week and are resting for this week's continuing festivities and the end to a very interesting and challenging year. After a year of crazy low mortgage rates, expect the line on the graph above to continue upward through 2010 if Freddie Mac is right. The mortgage financier expects rates to climb to 6% by the end of 2010.

Our inventory numbers for Monday the 28th of December, 2009 are:

MLS-listed Properties in Cocoa Beach and Cape Canaveral

Condominiums, all prices______567

_____Sold and closed in 2009__402

Single family homes, all prices__120
_____Sold and closed in 2009____77

Condos over $500,000________69

_____Sold and closed in 2009__29

Homes over $500,000_________46
_____Sold and closed in 2009____5

I will post a full year end review the first week of the new year after the listing agents have (hopefully) had time to update their listings. It is apparent now that we will finish 2009 with sales slightly ahead of the last two years.

A little commentary on the numbers so far; all of the sold over-$500,000 homes were in Cocoa Beach, none in Cape Canaveral. Of the 29 sold condos over $500,000, 15 were at the Meridian of Cocoa Beach and only one of the 29 was outside Cocoa Beach, an oceanfront Shorewood unit in Cape Canaveral. Over three quarters of all sold condos in the two cities in 2009 closed for less than $300,000 and just less than two thirds of the sold homes fell in that price range. Expect that trend to continue in 2010.

"You can clutch the past so tightly to your chest that it leaves your arms too full to embrace the present."
____Jan Glidewell

Thursday, December 17, 2009

Thank you, Internal Revenue Service

I decided to write this post yesterday after answering a reader's questions about the costs of ownership of a vacation condo. Back in June this year I wrote a post entitled "Positive cash flow. Does it exist?" In that post I explored a hypothetical case detailing expenses, income and other factors related to an investment condo and how they affected the chances of achieving positive cash flow. One factor I did not discuss was the contribution that favorable tax laws make to the overall picture of investment condo ownership. I will use another hypothetical weekly rental condo and explore the effect to overall return that tax deductions will make for an owner. (Disclaimer: I am not an accountant (not even close) and do not claim accuracy nor am I offering tax advice here. This is just a hypothetical case using my understanding of current tax laws. Please consult your accountant and/or tax lawyer before making decisions based on my writings.)

We'll use a $280,000 weekly rental condo in this scenario. We'll assume a 30% down payment (Fannie Mae requirements for 2nd home condos) on a 30 year mortgage at 5.5%. Our fixed monthly costs will be (estimates but close to reality);

property taxes__ 374
condo fees_____ 350
utilities________ 130
insurance_______ 70

Let's project a conservative average of $800 per week for our unit and a conservative 50% occupancy for the year. Management for weekly rental units runs from a low of 10% to a high of 40% in our area. Keeping our example conservative, I'll use the above-average 35% charged by the very efficient team at Cape Winds in Cape Canaveral for our example. That means that our 26 weeks at $800 will net the owner $13,520 after the 35% management fee, a shortfall of $10,912 to our annual expenses. Not looking so good at this point. Those two weeks a year of personal use are going to cost over $5000 each. Ouch! Not so fast. Let's look at the tax benefits. According to IRS publication 527 the following expenses are deductible.
  1. Advertising.

  2. Cleaning and maintenance.

  3. Commissions.

  4. Depreciation.

  5. Insurance.

  6. Interest.

  7. Legal fees.

  8. Local transportation expenses.

  9. Points.

  10. Rental payments.

  11. Repairs.

  12. Tax return preparation fees.

  13. Taxes.

  14. Travel expenses.

  15. Utilities.

[Edited: Thanks to Anonymous CPA for pointing out the math errors] All of our example monthly expenses of $2036 are included in the IRS allowed deductions except the mortgage payment. The interest part of that (average for the year of $892/month) is, however, included. That comes to a total of $21,792 of deductible expenses for owners with active participation. The IRS also allows for depreciation of investment property over a 27.5 year period. That means that for each year of ownership of our $280,000 condo, we will be able to deduct $10,181.82 as depreciation. In this example our investment condo will generate $31,973 of legal tax deductions ( expenses plus depreciation). After offsetting the deductions with the income of $13,520, we are left with $18,453 of net deductions saving the owner $4613 to $5166 in taxes assuming our condo owner is in the 25 to 28% tax bracket. [As pointed out by Anonymous CPA, the limit for deductions is $25,000 per year which would max out the savings for a 28% taxpayer at $7000.] Remember that this is using a conservative 50% occupancy unit with high management costs. In this example our unit does not achieve positive cash flow. I have used management charges at the high end of the scale (35%) and modest 50% occupancy as I prefer to project conservatively so that my surprises are good ones. Good management is available for considerably less than 35% and occupancies of more than 26 weeks a year are common.

But wait, there are other benefits and deductions. A well-informed and law-abiding owner can generate additional deductions including but not limited to some acquisition costs in the year of purchase and travel expenses to manage, conserve or maintain the property. In addition, with higher occupancy and/or lower management expense the numbers can look significantly better. Conclusion; a rental condo at today's prices can come close to paying for itself and, with good management, generate cash flow. Let's also not forget that an owner is allowed to use an investment property for the greater of "14 days or 10% of the total days it is rented to others at a fair rental price". [Edit: I didn't mention possible appreciation or mortgage principle paydown over time nor depreciation recapture taxes upon the sale. The combination of all three could be either a net positive or negative. No way to accurately project without a crystal ball.]

These same rules apply to units rented for longer than weekly periods. The overall numbers are generally less for units that rent for monthly or longer periods but the tax benefits still apply and will make the costs of ownership considerably less than at first glance. As always, do your homework and talk to your trusted expert before making a purchase. Non-American citizens, I have no idea how your tax laws treat your ownership of American investment property.

I hope this was helpful and not too confusing. I also hope my errors are minor. I expect to hear from readers more informed than I. Please contribute your thoughts, observations and experiences to the comments below. And to everyone reading this, I hope you have a happy, safe, rewarding holiday season filled with love and joy.

"Unless we make Christmas an occasion to share our blessings, all the snow in Alaska won't make it 'white'."
__________Bing Crosby

Friday, December 11, 2009

Dude, where's my deal?

Where are the new listings? If I look at the number of new listings every month it appears that we have a steady stream of new listings exceeding the sales. However, the chart above of actual inventory of MLS listings tells another story. Digging into the Cocoa Beach MLS data, I find that only 10 of the 33 new condo listings so far this month are actually first-time new listings. The other 23 are listings that have either expired and been relisted or withdrawn and relisted by the same agent to reset the "days on market" number in the MLS. This explains the evidence in the chart above that the actual number of listings has declined substantially. The new listing activity on the MLS is predominated by the churning of existing listings. This does not mean that there aren't new deals appearing. It only means that the number of listings selling exceeds the number of actual new listings. Many of the reticent, over-priced sellers eventually concede to market reality and those are the ones that sell. (See the anatomy of a round trip at the bottom of this post.)

A buyer in this market has to be more prepared than in the recent past if they hope to pick off a deal. Eventually we will find that we have surfaced into a normal market without a high number of distressed sellers. Are we close to that point? I can't say but I can say that we are closer than earlier this year and that finding that smoking deal has become more difficult as we work through the limited number of distressed sellers in our small market. If you're hanging on waiting for clear evidence of a market bottom, that evidence may come in the form of no more distressed sales. Plan your purchase timing accordingly.

Anatomy of a round trip (emotional and financial). A Cocoa Beach townhouse was purchased in April 2004 for $149,000 [confidence]. It was put back on the market four days later for $229,000 [enthusiasm] and stayed at that asking price until December 2004 when the listing expired. It was relisted in March of 2005 for $285,000 [greed] by the same listing agent. The market was still rapidly appreciating and the flipper was probably calculating his increased net worth daily over his morning coffee, hence the increased asking price. He kept the asking price unchanged until August of that year [denial] when the listing expired again. This time the flipper relisted with another broker the following week for $279,000 [denial mixed with a little concern], expectations beginning to abate. Price held firm until December 2005 when the listing again expired unsold. It disappeared from the MLS until May of 2009 when it reappeared with a new listing agent asking $154,900 [fear]. Price was dropped in August to $149,000 and again in November to $139,000 [panic]. Now that the seller has accepted market reality he is within striking distance of finding a buyer. There have been six sales in the complex during the time this unit was listed, all six for more than the current asking price. One red pill at any time in the last five years would have been worth not less than $10,000 to this seller.

"Even if you are on the right track, you will get run over if you just sit there."

_________Will Rogers

Monday, December 07, 2009

Ten questions for prospective condo buyers

I've seen many a search for a beach condo grind to a halt or take an abrupt turn when a buyer encountered an issue that they hadn't considered earlier. One's mental image of the perfect beach getaway may be at odds with the reality. Below is a list of ten pertinent questions prospective buyers of beach condos should have asked and answered prior to beginning the search.

1. If planning to get a mortgage for the purchase, how much down payment will the lender require? Mortgage requirements for Florida condos are different than those for condos in other states and for houses. Expect to have to put down 25 to 30% in most cases for Florida condos. Your pristine credit does not matter.

2. What will my taxes be? Forget what the current owner is paying. It does not apply to the new owner except (sometimes) for the first partial year of ownership. Estimate your taxes here.

3. Will there be a problem with my English Mastiff? Probably. Most condos have rules limiting the number and weight of pets. Some don't allow any pets at all.

4. Do the condo fees cover all expenses? No. In most condos the monthly fees cover insurance and maintenance for the building, water and sewer, basic cable, lawn care, common area electric and other common expenses. Some condos also include hot water in the fees and some even cover AC units. At the other end of the scale, some do a special assessment every year when the insurance bill arrives and a few complexes with artificially low monthlies seem to assess every time the wind changes direction. Be suspicious of condos with too-good-to-be-true low monthly fees.

5. Will the insurance on a Florida condo be sky high? No. As the condo fees cover the insurance for the building, the unit owners have only to cover the interior and contents of their units. I pay less than $1000 per year for a small 2 bedroom beach rental condo.

6. If I don't like the layout will I be allowed to remodel my unit? Yes. In most cases, any interior alterations that do not affect the structural integrity of the building are allowed. Removing non-load-bearing walls and building new walls are common alterations. Exterior alterations in most cases are more tightly restricted. Replacing the tired wooden front door with a hip new stainless steel door will likely not be allowed.

7. Are ground floor units undesirable? Not according to the people living in them. If you don't plan to go to the beach often, you will prefer the view from an upper floor. If you're one of those people or families that will be on the beach a lot, you may want to consider the lack of barriers (stairs or elevators) between your unit and the beach. I've found that the people in the ground floor units are the ones who spend the most time on the beach. Bonus here is that the ground floor units usually sell at a decent discount to higher floor units.

8. Can the condo association bill me for repairs to the building without my consent? Yes. All owners in a complex share the expense of maintaining the common elements and the board has a duty to maintain those shared assets. When the time comes to repair the balconies or replace the roof, if sufficient reserves don't exist, each owner will be assessed their share of the total. Sometimes an association will get a loan to pay for a large expense and increase monthlies to cover the repayment of the loan. This is why it is vital to review the condo budget and to read minutes of recent meetings. A buyer should be aware of recent and/or upcoming repair projects. Some buildings have reserves to pay for future expenses and some have none. Lack of reserves may kill chances of a mortgage. If considering a unit in an older building, all other things being relatively equal, a building that has recently completed a large renovation project is more desirable than one staring at an upcoming project.

9. If the seller agrees to pay the assessment for the upcoming concrete restoration project should I be concerned about anything else? Yes. The assessment might not be enough to take care of unexpected issues that surface during the project. Even more important, are you prepared to deal with the noise and inconvenience of the project for an extended period? Major concrete projects in addition to being expensive, are unbearably noisy, balconies are out of use and often pools are covered for the duration. As stated in number 8, a building with recently finished project is preferable all other things being equal.

10. Will I be able to rent my unit out for some income when I'm not using it? Maybe. Some condos have no rental restrictions while others have up to a one year minimum rental period. If you are prohibited from renting for less than a year, you won't be using the unit at all if you choose to rent it. If you buy a unit in a building with a one month or longer minimum rental, you may have a hard time picking up a monthly or longer tenant outside of the January through April season. You can read my detailed post on rental restrictions and their implications here.

This is by no means a comprehensive list but it's a good start. Knowing about restrictions and issues may eliminate a lot of wasted effort in your search. If anyone has others I've not included, please add them in the comments below.

"Trust your hunches. They're usually based on facts filed away just below the conscious level."

________Dr. Joyce Brothers

Tuesday, December 01, 2009

November Numbers

The Cocoa Beach real estate market maintained it's unseasonably strong pace through November with the year's total sales of condos in Cocoa Beach and Cape Canaveral exceeding 2008's total (371) before the end of the month. November 2008 saw only 18 closed condo sales in the two cities. Like the rest of the year, sales were concentrated in the lower price ranges with only three of the of 34 total recorded sales (as of this morning) over $325,000, all three at the Meridian on the ocean in north Cocoa Beach. Those units went for $640,000, $535,000 and $510,000.

Sales of note among the rest included;

3rd floor direct ocean Emerald Seas 2/2, 1602 sq ft $325,000

3rd floor south view "C" Mystic Vistas 3/2, 1686 sq ft, furnished $315,000

2nd floor direct Windward East, 1394 sq ft, 2/2, furnished $304,500

3rd floor direct Windrush 2/2, 1495 sq ft, furnished $265,000

2nd floor side view Spanish Main 2/2, 1153 sq ft, furnished $240,000

1st floor Captains Cove canal front w/boat slip, 3/2, 1650 sq ft $215,000

2nd floor Solana Lake 2/2, 1698 sq ft short sale $200,000

5th floor Solana Lake 2/2, 1828 sq ft short sale $190,000

2nd floor direct Royale Towers 1/1, 888 sq ft, furnished $180,000

4th floor south view River Lakes 2/2, 1244 sq ft $169,000

2nd floor direct river Cape Shores 2/2, 1034 sq ft furnished $128,000

6 yr old foreclosed Cape Gardens townhouse 3/2, 1706 sq ft $114,000

All of these had garages with the exception of the Cape Shores unit. More sales from November are sure to push the total number up as tardy listing agents update the MLS. I'll edit this post with the updated numbers in a few days with a graph of the year so far. For what it's worth, there are 103 condos under contract but not yet closed in the two cities.

"I have made this letter longer than usual because I lack the time to make it shorter."

__________Blaise Pascal

Tuesday, November 17, 2009

That's not a Baby Ruth

As of this morning, November 17, we are eight condo sales away from matching the total for the entire year of 2008 in Cocoa Beach and Cape Canaveral. Sales recovered from a miserable first half of the year with a tremendous second half push that caught most everyone by surprise. Let's parse the numbers as they stack up today.

The bulk of the sales activity this year was concentrated in the lower price ranges with half of all condo sales closing below $180,000. Only 72 condos closed for more than $300,000.

Inventory levels for the active parts of our market are once again at healthy levels. The sub-$180,000 condo inventory will last less than 13 months at the average sales rate of 2009 so far. If we use the more recent sales rate, that supply will be gone in less than one year. As we move up the price scale, the absorption rate extends. In the $200,000 to $300,000 price range, we have a 17 month supply using the average sales rate for the year, slightly less using the more recent rate.

The bracket between $300,000 and $500,000 is holding a 23 month supply, slightly less using a more recent sales rate. High but far below levels of the last two years. Even I, perennially cautious, am encouraged by these numbers. But, wait. There's something unsavory floating in the champagne, orange sherbet punch. My half-empty sensibilities are to be rewarded when I look into the luxury condo numbers.

Of the 363 recorded MLS condo sales in the two-city market, only 23 were for more than $500,000 and only 12 were for more than $600,000. Of the 23 sales, more than half were at the Meridian where buyer's agents were being paid as much as 5% to bring a buyer.

Inventory for over-$500,000 condos stands at 66 this morning. Only four remain at the Meridian, all resales, and the excessive buyer's agents' commissions disappeared with the last developer's unit. If I use all >$500,000 sales so far this year to determine supply I get 30 months worth of inventory in this price range. However, if I strip out the Meridian sales and the Meridian listings to get a more accurate picture of the luxury segment, I see that we have a 59 month supply. However, as bad as this looks, it is not an accurate picture. This is just the number of MLS-listed units. The shadow inventory in luxury units is substantial. There is but one Magnolia Bay unit listed on the MLS with dozens remaining unsold. One Ocean Club unit is offered on the MLS, the only recorded sale in the empty building. No Villa Verde units are MLS-listed in that entirely unsold building. There are others but these hint at the size of the invisible supply that is hanging on the sidelines.

What are we to conclude from this exercise? Overlaying my elementary arithmetic on elementary economics, I foresee a bottom up recovery in the Cocoa Beach and Cape Canaveral housing market. The lower price range appears to be at or close to a stable supply and demand level with the mid-range not far behind. The turd in the punch bowl at our recovery party is obviously the luxury condo segment. With the supply so skewed from the demand I can only predict more price erosion and an indeterminate recovery time for $500,000 plus condos. For those of you thinking of venturing into this market segment, be aware of the numbers and the very real possibility of more depreciation before the bottom is reached. Buzzword for you is Cuidado! If you're unlucky enough to be trying to sell a unit above a half million dollars my advice is to price aggressively unless you can wait for years and are willing to risk further price erosion. In addition, you may also want to consider following the Meridian's successful strategy of luring buyer's agents with excessive commission and/or bonuses. It's a distasteful practice but one that has been proven to work.

In other news, the surf has been magnificent and is still beautiful this morning after days of good waves. A visiting friend from Miami paddled out with me this weekend and caught his first waves after 16 years out of the water. He was as stoked as a 12 year old grommet and is now in love with Cocoa Beach. I am honored to live in this special place.

"Two out of three ain't bad."

Sunday, November 08, 2009

Estimates of Time

Have you ever noticed that estimates of time are almost always optimistic? "Your car will be ready at 1. The doctor will see you at 10. I'll meet you at 12. We'll have an answer on your loan on the 3rd. The game will start at 8." The universe conspires to delay everything. At any rate, I have adjusted my behavior to accommodate this universal leakage of time. I expect everything to be late. Life has become less frustrating.

"All estimates of time are overly optimistic. Adjust accordingly."___Larry

This recent major uptick in monthly year-over-year condo sales got me to thinking about whether or not we are getting a signal of a trend shift. Year over year monthly numbers are the best metric available to me by which to measure the sales trend. The first half decade of the new millennium saw closed condo sales on a steady year over year increase until 2005 when the number of months that showed an increase were equal to the number of months that showed a decrease. Even though the numbers for the last half of that year were abysmal by comparison, 2005 exceeded 2004 in total sales by 1%. The boom years were over although most did not recognize the signals or did not want to believe them. By the end of 2006 it was apparent to all but NAR that a major decline was happening. We had not a single month in 2006 with higher monthly year-over-year numbers. The total number of condo sales for the year of 2006 was 38% below 2005.

The trend continued in 2007 with eight months showing lower year over year numbers with total year over year sales down another 21%. We began 2008 with the same hopes of a "spring selling season" that many were clinging to the two previous years. It was not to be and 2008 saw nine months with lower year over year numbers and the total sales for the year declined another 6%, thankfully a slower pace of decline.

We began 2009 with sales at the slowest pace of the last five years and clocked five sequential month over month declines until the trend shifted in June. Since June we have substantially beaten last years numbers every month but one with the last two months seeing blow-away comparisons. Even though this year's total sales will still be less than 50% of the peak year, 2005, there is evidence to support optimism. Buyers taking advantage of the first-time home buyer credit almost certainly contributed to the recent bump in the numbers. The extension and modification of the credit through next June will likely continue to add more to the sales through that time. Draw your own conclusions, retain some skepticism but be aware that the market is active with substantial numbers of buyers cherry picking the inventory. While inventory is still heavy in the over-priced, new luxury condo segment, finding a screaming deal in a lower-priced oceanfront building has become a needle-in-a haystack exercise. The ability to recognize a jewel when it appears and the willingness to pull the trigger has become vital. Market knowledge will pay handsomely. Do your homework and, if you want an inside advantage, I'm here to help. You can email me at

Our inventory numbers for Friday the 13th of November, 2009 are:

MLS-listed Properties in Cocoa Beach and Cape Canaveral

Condominiums, all prices______579

Single family homes, all prices__122

Condos over $500,000________65

Homes over $500,000_________47

"The world's greatest fool may say the Sun is shining, but that doesn't make it dark out."

___________Robert Pirsig

Tuesday, November 03, 2009

Non-repeating history

I'm back after getting the boat to Abaco from Florida. Photo above from yesterday morning at the home mooring off Lubbers Quarters with Elbow Cay in the background. This 42' Lagoon Hybrid sailing cat is now available for charter, either bare boat or captained in the crystal clear waters of Abaco from

Our little real estate market has been on fire this normally slow time of year. After setting a four-year record for closed sales in the month of September, October followed suit with another four-year record. [EDIT] Due to a glitch in the MLS, the numbers I reported yesterday were not accurate. The charts are now corrected. October was unseasonably strong but not our biggest month of the year for closed condo sales as I reported yesterday. It was, however, the busiest October since 2005. The bulk of the activity, as has been true all year, was concentrated in the sub-$300,000 range and short sales and foreclosures accounted for just less than a quarter of all closed sales. November looks to continue the trend with both barrels loaded with pending sales. During the last 13 days, 36 condos and townhomes have gone under contract in Cocoa Beach and Cape Canaveral as reported on the MLS.

Foreign buyers taking advantage of the weak US dollar are part of the recent activity. Without making any predictions, the evidence suggests that our market is stabilizing. Even as some prices drift lower, some condo complexes have seen closed sales notch upward. Will prices resume the downward slide after a false recovery? No one knows but with prices in many cases well below 50% of the peak, buyers are stepping in. Markets work on supply and demand and demand is at a four year high right now. First chart below is 2008 and 2009 only.

Notice in the four year chart below that October 2009 has the highest number of sales of any October in the last three years. A trend with legs? We'll see. I'm encouraged.

"History is more or less bunk. It's tradition. We don't want tradition. We want to live in the present and the only history that is worth a tinker's damn is the history we make today."
______________Henry Ford

Saturday, October 17, 2009

I'm good.

Space shuttle launch as seen from the International Space Station.

September's unseasonably strong sales trend is intact halfway through October. As of this morning twenty condos and townhomes listed on the Cocoa Beach MLS have closed in the two-city market, eight of them in Cape Canaveral. Last October saw only 23 total closed sales in the month. We look to easily trounce that number this year with 31 newly accepted contracts since the 1st of October in addition to those already pending. Half of the closed condo sales so far are for less than $180,000 with only one for over $500,000. The price trend continues to creep downward in most instances with a few notable exceptions.

There have been three single-family home sales in the two cities so far, highest price; $226,000 for a nice, updated 3/2 on Curacau in Cocoa Isles.

A top floor Mystic Vistas "A" building, east-facing, 3/2, furnished, closed for $403,500, twice what lesser view units have closed for recently in the complex.

A 3rd floor north corner, 3/3 Meridian, also furnished, sold for $725,000.

A top floor never lived in Garden Bay 3/3.5 closed for $410,000 or about $200,000 off the original asking price.

A 4th floor south view River Bend 3/2 in south Cocoa Beach sold for $240,000 as a short sale. Incidentally, only two of the twenty closed sales this month have been short sales, a surprising trend I noted last month.

A very nice, four year old Bayport 3/2 townhome with 2-car garage in Cape Canaveral closed for $205,000.

The uncertainty of association health was apparently mitigated enough by a super-low price on a foreclosed South Beach Keys unit that someone was willing to step up and take the risk. This direct Banana River 3/2 unit with 2-car garage in south Cocoa Beach that sold new in 2006 for $495,000 went for a shocking $175,000. Expect more news from this small complex.

A Majestic Bay townhouse in Cape Canaveral that sold new in 2005 for $274,900 sold as a short sale for $140,000. Not bad for a 4 year old townhome with 2-car garage.

And, a Brisa del Mar condo conversion on Ridgewood Ave. that sold for $200,000 in 2005 closed for $90,000.

I was sitting in the water recently on a small, glassy day on a 7'0" fun shape when my 15 year old neighbor paddled over and asked why I wasn't riding my longboard. I said, "I'll ride it if you'll go in and get it for me." Laza looked at me like I'd suddenly sprouted antlers, said, "I'm good" and paddled off for saner waters. Kids.

I'm off on a boat delivery tomorrow and will be incommunicado for a week or so, weather depending. In the interim, Danielle can be reached at for any issues or inquiries. As a wise man once said, "All work and no play makes Jack a dull boy."

Thursday, October 08, 2009

A tale of two sales

Short sale craziness continues. The short sale team in my office took two short sale listings a few days apart in August. At the time, neither seller had done any preliminary work with their respective lenders. The team went to work getting the hardship and other required documentation together from the sellers for submission to the lenders. Both properties got offers shortly which were submitted within days of one another to the lenders along with all requested documentation. Both sellers had legitimate hardship. Forty days later, one sale was approved in writing and ready to close while the other lender was still asking for more and more documentation. The seller confessed yesterday that he had continued to make mortgage payments the whole time that we were trying to negotiate a short sale with his lender. Asking a lender to approve a short sale while the mortgage is current is like panhandling in an Armani suit. Chances of success are slim.

The take-away: If a property owner has the resources to stay current on the mortgage and does so, the lender will be way less motivated to agree to a short sale or modification. Why should a lender write off tens of thousands of dollars when they can just continue to accept timely payments? Any reader considering pursuing a short sale needs to understand that hardship must be real and able to be proven. Prepare to be asked for documentation similar to that required to obtain a new loan. Without proof of hardship, chances of approval approach zero. With proper documentation, real hardship and an experienced short sale negotiator a seller stands a good chance of successfully selling a property short.

"You have to learn the rules of the game. And then you have to play better than anyone else."
___________Albert Einstein

Friday, October 02, 2009

Wake up - September's finished

How bout that graph? September condo sales in Cocoa Beach and Cape Canaveral spiked up considerably over the previous year with 44 closed MLS sales of condos and townhomes during the month. There were four closed single-family home sales during the month, all in Cocoa Beach. One surprising stat was the fact that, of the 44 condo sales, only five were short sales.

The lowest price condo sale was $13,800 for a foreclosed 1/1 Golden Gate Manor unit in Cape Canaveral that sold in 2006 for $82,500. That's a mind-numbing 83% off the peak. The highest price condo sale was $555,000 for a never-lived-in Michelina 5th floor corner, 3/3, 2524 sq. ft. This same unit was asking $849,500 just one year ago. It was the only condo sale for more than $500,000 in the month. The adjacent, slightly bigger Michelina unit (not a corner) also closed for $450,000 or $177 per square foot. Not bad for brand new oceanfront, even if side view.

A 7th floor, 3/2 Crescent Beach Club in south Cocoa Beach closed for $325,000 which bumps the comps down slightly for that building which is well into a major and very expensive concrete restoration project.

Harbor Isles was on fire in September with five closed sales. Not surprisingly, the ever-present Betty Siegel was involved in three of those sales. Looking back over the stats for the year, there have been ten MLS sales in Harbor Isles. Of the ten, my office has represented one or both sides of eight of those transactions with Betty being involved in six. You go, girl.

Another Hacienda del Mar direct ocean 2/2, 4th floor with garage sold for $248,500. It was in original condition.

I was able to close a short sale at Cape Winds of a direct ocean ground floor 2/2 with the wide patio for $210,000, a new low for direct ocean units in this very popular complex. With this sale and two other pending short sales there, the other overly optimistic sellers will now have to come to terms with the new reality.

There were three sales in the month of 2 bedroom units at Ocean Woods in Cape Canaveral at prices from $129,000 to $155,000.

In head-scratching news, in a year in which a total of only 20 units have closed for over $500,000 ( half of those at The Meridian) eight pre-construction units in an unbuilt oceanfront building in south Cocoa Beach popped up on the MLS this week at prices from $800,000 to $1,050,000. The same developer is offering 16 other units in four different completed new buildings on the MLS, most or all having been reduced substantially in price. A+ for optimism.

Fishermen, the mullet run is back on in force. There are acres of mullet moving south along the beach with packs of predators in attendance. This is the best time of year for fishing from the beach with opportunities to catch snook, Spanish mackerel, bluefish, kingfish, trout, redfish and tarpon among others. Take advantage if you enjoy fishing but, whatever you do, enjoy October for all the other reasons that make this month my favorite of the year in Cocoa Beach.

"As my memory rests but never forgets what I lost
Wake me up when September ends."____Green Day

No one the wiser

I often write pieces that never see the light of day here on the blog. The piece that I wrote yesterday and intended to post today will become one of those lost letters. In my next-day read this morning the account appears somewhat inflammatory and would probably have caused some ruffling of feathers and almost certainly some backlash. Perhaps less specific references to the guilty parties will make the story acceptable. Here goes.

There once was a broker who ran a successful real estate office in a cute coastal town. One of the broker's trusty agents found an opportunity to pocket $325 of his client's money in a property management transaction with no one the wiser. The client from whom the money was stolen found out quite by accident a few months later about the theft and confronted the agent. The agent played dumb and referred the client to his broker for resolution. The broker defended the agent and refused to return the client's money. The client elected not to pursue the matter. The larcenous agent continued his career with now-obvious support for his business style and the broker rose to a more prominent position in the local real estate community and continued to prosper. No one the wiser.

"The greatest way to live with honor in this world is to be what we pretend to be."

Tuesday, September 22, 2009

Mid September Update

Thanks to all who chimed in on the last post. Closings are slow but plugging along with 20 closed condos and townhouses so far in the month of September in Cocoa Beach and Cape Canaveral. Sales ranged from $32,000 for a foreclosed, 464 sq. ft. 1/1 condo conversion in Cape Canaveral to $335,000 for a brand new, 3rd floor, direct river, 3/2.5 with 2210 sq. ft. at Garden Bay in Cocoa Beach. Other sales of note closed so far included;

Ground floor 2/2 Cape Winds direct ocean for $210,000

2nd floor, direct river, Harbor Isles 2/2 for $220,000

16th floor, direct ocean Stonewood 2/2, very nice for $315,000

6th floor, south ocean view Royale Towers 2/2 for $225,000

There have been three single family homes sold so far, all in Cocoa Beach. They ranged from a small, trashed 3/2 short sale on Samar that sold for $110,000 to a direct river 4/2 on Bali that closed for $389,000.

Checking the MLS this morning I find a total of 131 pending or contingent residential properties in the two cities. Over half of these contracts are short sales. Of 716 total active residential listings, only 94 are short sales. This skew between offered and contracted numbers makes it clear that the action in MLS-listed properties is heavily concentrated in the distressed properties. If you're hoping to take advantage of the market, don't make the mistake of only looking at distressed properties. There are a few sellers who understand the market dynamics who have priced their properties accordingly without the hassles of the short sale process. On the other hand, if you have a good property contracted as a short sale at a good price and are losing patience because of the length and opacity of the process, be strong. Unless you find something better in the meantime, your patience may be eventually rewarded with approval. We have had a flood of short sale approvals recently after months of very little contact from the lenders, so, be aware of the frustration of the process, be patient and have a Plan B in case you don't get approved.

Snook are still being caught in the surf and the mullet run hasn't really peaked yet, so, there's plenty of opportunity for everyone to get out there on the beach and catch a great dinner.

"The unspoken word never does harm."_____Lajos Kossuth

Monday, September 14, 2009

Blurring the Ethical Line

eth·i·cal Pronunciation: \ˈe-thi-kəl\
1: conforming to accepted standards of conduct <ethical behavior>

Rhetorical questions:

1. Assuming no dishonesty, is it ethical for a listing agent to use all of her skills, experience and knowledge to try to get her clients the highest possible price at the best possible terms? Is the answer the same if this behavior contributes to rising prices, harming future buyers?

2. Conversely,
also assuming no dishonesty, is it ethical for a buyer's agent to use every bit of his skills, experience and knowledge to obtain the lowest possible price at the best possible terms for his client? Is the answer the same if this behavior contributes to declining prices, harming future sellers?

I ask these questions for a reason. I represent a lot of buyers. In my representation I always use every scrap of market knowledge and all my negotiating skills to try to do the best possible job for my clients which usually means the lowest possible price at the best possible terms. I do this with honesty and fairness to both sides of the transaction. My efforts in recent years have often been a part of the chain of lower and lower selling prices in many complexes and neighborhoods. It was reported to me this past week that my aggressive representation of my clients, buyers all, was being characterized by at least one Cocoa Beach citizen as unethical because it has contributed to lower prices in our market. While the premise seems preposterous, at least to me, I welcome comments here on this blog from anyone who has some insight to share. I certainly know that I tend towards the aggressive in my negotiating but I feel strongly about my character and ethical standards and, in this case, take offense to the accusation. I will take all comments with an open mind. Thanks for reading. Back to our regularly scheduled programming with the next post.

"If it is not right do not do it; if it is not true do not say it."
___________Marcus Aurelius

Wednesday, September 09, 2009

August sales

Sorry for the break in posts. I avoided the Labor Day crowd in the mountains of North Carolina.

The numbers are in for August. As you can see from the graph above, we have taken the first step off the seasonal sales cliff. After trending above last year's numbers in June and July we had a total of 27 closed MLS-listed condos and townhomes in Cocoa Beach and Cape Canaveral in the month of August, slightly behind last year's 30 units closed. The sales ranged from $37,000 for a tiny Lamp Post efficiency in Cape Canaveral to $2.01 million for the entire top floor of Ocean Cove in south Cocoa Beach. This particular brand new unit was 6000 square feet with 4+ garage spaces and a private boat slip across the street on the Banana River. Shortly after this sale closed, the developer slashed over a million dollars off the prices of the remaining unsold units in the building.

Sales of note included a Meridian resale that went for $575,000, over a hundred thousand less than the new purchase price just two years ago. In south Cocoa Beach a fifth floor Crescent Beach Club south corner unit closed for $425,000. It was a three bedroom unit with 2278 square feet. Next door at the Constellation a 6th floor unit with 2419 square feet sold for $395,000 and a 5th floor south corner beautifully totally remodeled unit at Coral Sands went for $405,000.

A foreclosed Perlas del Mar in Cape Canaveral sold for $165,000, a remarkable $285,000 less than the new purchase price two years ago. A 2/2 townhome at Villages of Seaport closed for $107,000 as a short sale.

There were only four closed single-family home sales in the month, none for more than $200,000 and none on the water.

For those looking for direct ocean units in the lower price range, I can find 29 units this morning with at least two bedrooms asking under $300,000 that are east facing. Over-priced listings still dominate the declining inventory but gems are there for the patient. If you'd like a daily dose of new listings, price drops, sales and market news of note you can follow my Twitter feed. In case you missed it, snook season has opened and the fish are already on the beach feeding on the early schools of mullet making their annual run southward. Use a cast net to catch mullet from the beach, put one back out with a weight to keep it on the bottom and hang on for some of the best eating in the ocean.

Comments are welcomed on any of the posts here.

"When a true genius appears in the world, you may know him by this sign, that the dunces are all in confederacy against him." _________Jonathan Swift

Monday, August 31, 2009

If Willy Loman had a blog

More of our great surf recently. Laza tags a screamer with typical nonchalance.

I continue to be amazed at the disingenuous hype being dispersed by others within my industry. I can't go to a real estate blog or website without reading the same old crap intended to entice buyers into making a move and purchasing a property. Folks, you need to be very careful choosing a buyer's agent to assist you in your search. There are plenty of warning signs that should give you pause, chief among them, the absence of cautious advice and/or undiluted enthusiasm about the market. If your agent is spending too much energy convincing you that everything is great with our market, you need to reconsider his motivations and sincerity.

and ... reason Number 1 that your agent may not be a good choice: He makes a blanket, unqualified statement containing any variation of the words, "Now is a good time to buy." It may be a good time to buy some isolated properties, but, as I research the available listings on our MLS, I find far more properties that are severely over-priced than those that may qualify as a "good buy". If you accept that well-worn phrase and come into our market thinking that it applies to all properties, you may well become the next bagholder.

Having said all that, now is a good time to sift through the available properties looking for those good deals hidden among the clutter. Arm yourself with knowledge of recent sales that are comparable to the property type you're seeking and keep your focus. Don't chase something you don't want just because it's a deal or because you're impatient. Your search may have started with direct ocean units and became diverted to side views because of the lower prices. As I've said before, that forty grand you saved on the purchase price might not taste as sweet when you're sitting on your side-view balcony staring at the building next door with a cold north wind in your teeth. Patience has been rewarded this year.

Speaking of patience, let's discuss short sales. A buyer in a short sale is at the total mercy of the listing agent and, in many cases, completely in the dark throughout the process. I have worked with some real pros on the listing side (you know who you are and I thank you) and with some that are completely clueless to the process and have a possibility of closing a deal approaching zero. In addition to the listing agents who can't close a short sale, there are short sale listings in our system that are, I suspect, just bait to get the phone or in-box lit up. Proceed with skepticism and caution in this part of our market and don't even consider offering on a short sale unless you are willing to wait indefinitely. If you do put in an offer on a short sale, know that closing is not certain. Keep looking while the bank twiddles it's thumbs. It's possible to find non-short sale properties at the same levels as many of the short sales without all the hassles.

MLS inventory August 31, 2009 Cocoa Beach & Cape Canaveral

Condos, all prices_____635 - 22 sold so far in August
over $500,000_________78 - 22 sold since New Year's Day
Single family homes___108
over $500,000_________43

"Expect ALL estimates of time to be overly optimistic."_____Larry

Monday, August 24, 2009

What a day it was

Sunday, August 24 in south Cocoa Beach. It was like this all day except for about an hour during which we endured an intense electrical storm that chased everyone from the beach. Of course, we locals were back in the water by 5 PM when the sky went blue again and the tide ebbed. The shot above is of one of my friends and her son sharing a wave out back about midday. You can click on the photo for a larger image.

Note: I have turned on comments for the blog for the first time since it's inception in 2005. Feel free to leave comments on any posts. Vulgarity will not be tolerated but difference of opinion is welcomed.

Saturday, August 15, 2009

The World is a Vampire

Delta rocket launch, sunrise Aug. 17, 2009

We're halfway through August and, as expected, activity has slowed. We've had 12 closed sales from the Cape Canaveral and Cocoa Beach MLS, 11 condos and one single-family home. The home was a small 3 bedroom, 1.5 bath short sale on south Orlando Ave. that closed for $139,000. The sold condos ranged from $79,900 for a foreclosed, non-waterfront 2 bedroom 2 bath unit at Costa del Sol to $425,000 for a 5th floor direct ocean, southeast corner at Crescent Beach Club in south Cocoa Beach. This unit had 2278 square feet with 3 bedrooms, 2 baths and a massive wrap balcony.

An interesting sale was the 2nd floor, southeast corner at Palmas de Majorca in downtown Cocoa Beach. This 3/2 unit had been on the market for 731 days, always overpriced and was down to $549,000, the most recent still-too-high asking price when something enticed the seller into accepting $400,000. Maybe he read my "Breakdown, go ahead and give it to me" post or perhaps the appraisal came in low. At any rate, for $186 per square foot, this one was a deal. The too-close boardwalk traffic intruding on the privacy from the 2nd floor probably contributed to the low price. It was, beside that shortcoming, a very nice unit.

Another good deal was a Constellation 3/2, this one on the 6th floor with 2419 square feet and panoramic views of the ocean and the Banana River across the street. Sold for $395,000 or $163 per square feet. Don't expect to get a smaller unit for these $/sqft numbers as large size contributes to the low ratio.

Someone picked up a 2/2 direct river, 2nd floor Sunset Harbor for $146,000. Needed some updating. Another foreclosed 4 bedroom, 2.5 bath Perlas del Mar in Cape Canaveral sold for $165,000. It sold new two years ago for $450,000.

The 3rd floor south ocean view Cape Winds, 1 bedroom 2 bath unit that was offered as a short sale for $150,000 got a contract in just seven days.

That's it for now. New listing activity is slow as are sales and there have not been a lot of compelling new offerings. That is normal for this time of year. If the short sale bottleneck opens up we could have a surge of closings which would be welcome. I received lender approvals this week for two short sales that have been in the system for 105 and 75 days while I have four others that have been leapfrogging desks for up to 150 days without approval. Go figure.

"Despite all my rage, I'm still just a rat in a cage."
_____________Billy Corgan

Sunday, August 09, 2009

Does this make my butt look big?

Rocky shoreline in Satellite Beach at low tide. There are no rocks in Cocoa Beach but as one heads south, rocks are first encountered at Patrick Air Force Base and the rocky shore continues all the way to Indialantic.

Does this make my butt look big? Everyone knows there is only one correct answer to this question no matter who is doing the asking. There is another popular question that also has but one answer. That question is one that is posed to loan officers and mortgage brokers every day, "Do you foresee any issues with my getting a loan on this property?" Day one in loan officer school the class is asked this question and then instructed to shout in unison, "No, not at all." over and over until the phrase is firmly imprinted on their brains. Then, when "the question" is posed by an actual borrower, the neuro lingual programming takes over without any conscious thought and "the answer" comes forth confidently. Doesn't matter that the Florida condo that the borrower is asking about is 1800 miles away from the lender's office or that the last Florida condo loan that the loan officer did was in 2006. "We can do it" he says with a confident smile. Right. He can do it until he can't and that usually doesn't becomes evident until well down the road towards closing.

All borrowers who are buying a Florida condo would be well advised to talk to a lender in the market in which they are purchasing. There are issues with Florida condo loans that lenders will not encounter anywhere else. A great credit score and previous relationship with a distant lender might not be enough when the hurdles to closing start appearing. A good local lender who is active in our market will have knowledge about Florida-specific loan issues and will likely have encountered many of the sure-to-happen problems with previous loans. That knowledge allows him to be proactive rather than reactive in addressing these issues. Anticipating and working to solve an issue before it presents itself can be the difference in making a closing date or not.

Disclaimer: I'm not saying out-of-area lenders can't close deals here. It happens all the time, but, from plenty of personal experience, I can say without hesitation that the odds of having problems are increased when the lender is not local. Just don't expect a loan officer to admit that his performance out of state may be compromised by lack of local experience. Remember the NLP "answer" from class. I can close deals and represent buyers anywhere in the state of Florida but I don't venture outside my market because I can't do the best possible job for my client in a market I don't know. Greed and false confidence encourages many realtors and lenders to venture out onto the thin ice, often to their client's detriment. Be skeptical when yours fearlessly claims proficiency in an unknown market.

/cue theme song (everyone sing along)__ "Knowledge is power..."

"Education is when you read the fine print. Experience is what you get if you don't."_____Pete Seeger

Tuesday, August 04, 2009

Dear Miss Cleo, What's next?

We had a total of 37 closed condo and townhome sales in Cocoa Beach and Cape Canaveral in the month of July as recorded in the MLS as of this morning. The number, as always, will likely creep up slightly as a few tardy listing agents record their sales. Lowest sale was a foreclosed Pearl of the Sea one bedroom unit at $45,000 and the highest was $740,000 for a mac-daddy 7 year-old penthouse unit at Ocean Terraces in downtown Cocoa Beach. It was the entire top floor, 3464 sq ft with four bedrooms, three baths and a 2 car garage.

There were three sales over a half million dollars, the most in a single month so far in 2009. Only eight of the sales were for more than $268,000. Short sale closings were off with only five closed short sales in the month. That doesn't necessarily mean that short sale activity has slowed. Anecdotal evidence from my desk and conversations with other agents suggests that there are stacks of short sales in limbo with the lenders taking longer than ever to reach a decision. If they ever start moving on the short sale process we could see a surge in closed sales.

The "smoking deal" of the month was a short sale at Lookout Point three blocks from downtown Cocoa Beach. A 2 bedroom 2 bath unit with boat slip and private garage closed as a short sale for $145,000. The busiest complex of the month was Shorewood in Cape Canaveral with five closed units followed by Xanadu in Cocoa Beach with three closed.

Inventory is down to 639 condos and townhomes with 95 of those offered as short sales. There are 110 single family homes currently offered in the two cities. Only three of those are short sales.

Miss Cleo has advised that we can expect, barring a surge in closed short sales, activity to decline through December following our normal trend. If you hope to sell this year, make your selling decisions accordingly.

"When your arm gets hit, the ball is not going to go where you want it to."
_____________________John Madden

Friday, July 31, 2009

Hard Decisions

Another hot Mayo board. This one is a 6'2" quad in Coke bottle tint.

I have talked to several distressed property owners over the course of the year who have found themselves in the undesirable position of owing substantially more on their mortgages than their properties are worth. Whether they bought at the peak or refinanced with cash out, they now struggle with their obligation to continue to pay off a loan that's far more than the property would bring in a sale. Many feel an ethical obligation to continue to pay regardless of the impact on their personal finances. Even some of those not so ethically encumbered continue to pay for fear of ruining their credit or even shame among their peers should they decide to walk away. Those who find themselves in this position have three basic choices; continue to pay, pursue a short sale or simply walk away. Without taking any position on the ethics or morality of choices two or three, I will point the reader towards a very interesting discussion of the subject at Mish's blog. Excerpt below.

"Mortgages are not ethical documents, they are legal contracts. The typical residential mortgage for an owner-occupied home gives the borrower two options: pay on time and in full, and keep paper title to the house, and full entitlements to any appreciation upon its later sale after the mortgage is satisfied; or, stop making payments, and hand the keys back to the lender. Morality and ethics don't even enter the equation. Either option is perfectly legal for the borrower, and the only criteria should be business-based. All the ethics you need are contained within the four corners of the pages of the mortgage contract."

"It doesn't matter which side of the fence you get off on sometimes. What matters most is getting off. You cannot make progress without making decisions."_________Jim Rohn

Saturday, July 25, 2009

Breakdown, go ahead and give it to me.

Woke up this morning thinking another surf before work would be in store with a light morning wind and a dying swell, but, it was not to be. Swell has dropped enough overnight that the half tide this morning was just not working. Possibly at the late afternoon low tide if the onshore wind isn't on it. At any rate it's been a welcome three days of good surf.

In lieu of ocean communion I headed to the office early and began sifting and number crunching through the MLS trying to sniff out the ever harder to find gems hidden in the active listings. I focused my search on the type of unit I am most often asked about, direct ocean with a good view. To set a base line, I began by searching for all direct ocean units above the ground floor with at least 1200 sq. ft. that have sold in Cocoa Beach and Cape Canaveral since April 1 this year. [sales before April 1 are ancient history in this dynamic market] Discarding all sales of brand new units and those that didn't have a direct, east facing view the list contained 15 closed sales through yesterday. Lowest price was $207,000 for a 2/2 Driftwood in original but decent condition. Highest price paid was $675,000 for the northeast corner Xanadu penthouse, attractively remodeled. Sorting for price per square foot, the lowest price paid was $155 per square foot for a partially remodeled 2nd floor Constellation and the highest was $259 for a gorgeous 2nd floor, 5 year old Ocean Oasis. The average was $211 per square foot. I got the same number even when throwing out the high and the low. Only three of the sales were for less than $196 per square foot.

Now I have a number that the current market is paying for this type of unit. I also know from my research that these sales closed at an average of 90% of the last asking price. Searching using the same criteria for active listings and capping the price at $675,000, the highest paid price in my sold search, I have a list of 57 units actively for sale above the ground floor, east facing with at least 1200 square feet. Not surprisingly, the range of asking prices is out of touch with the reality of the sold range. Sorting on dollars per square foot, the lowest price is $184 per square foot (suggested short sale price) for a mostly-original Waters Edge 6th floor and the highest is, hold your breath, $353 per square foot for a Canaveral Sands 3rd floor corner with some updates but far from plush, offered furnished.

Of the 57 units on our list, 47 are asking more than 10% above the average on the sold list and fifteen dreamers are asking more than 10% above the highest. The average asking price of all 57 units is $260 per square foot or 23% more than the average sold price in the most recent four month period.

Our takeaway: The "for sale" market, for the most part, is out of touch with the recently sold market. There are anomalies and exceptions, of course, and these are the ones that buyers should be looking for in addition to the ones that are obviously priced right. I will consider paying above the average closed $/sq.ft. if the unit is exceptional in some way. If I can get someone's expensive remodel for a fraction of what it would cost me, it's worth consideration. I'm also willing to pay more for a corner or a second garage. On the other hand, I'm going to need to purchase below the average if a unit needs work. Buyers need to be thinking like appraisers. Establish a base price based on square footage and then adjust up or down for pluses or minuses. Also, as I mentioned in a recent post, it's vital to justify your offer with hard numbers like the ones here. Your offer may be far below asking but real world examples may be enough to snap an optimistic seller out of Lala Land. If you're offering and your agent is too lazy to do this research for you feel free to use my numbers here, or, probably smarter, find an agent who will.

By the way, in my search of active listings, there were six units asking less than the average sold $/sq.ft., two of them nice units firmly in the "deal" category at full asking price. Now, no TV until you do your homework.

"Deep greens and blues are the colors I choose."
__________James Taylor