This is one insider's unpolished take on the current state of the Cocoa Beach and Cape Canaveral, Florida real estate market. I am a licensed agent and partner with Walker Bagwell Properties. My sometimes blunt opinions here are not welcomed by the real estate mainstream. Whatever. Hopefully my insights will allow you to make better decisions about your participation in this market.
Larry Walker - 321.917.5786 - email@example.com
Sunday, April 12, 2009
Hip to be Square
Suppose that, having heard various predictions about the "bottom" and the probable rebound in the real estate market, you have decided to take advantage of the crash and have been tracking real estate prices trying to anticipate the exact bottom. To maximize the opportunity you want to either buy right at the bottom or negotiate a price that will put you close to the bottom when that happens. How does a bottom in a price cycle look? What are the indications that it is close? The only absolute evidence that a bottom has been reached comes after the fact when sales begin to record that are higher than previous sales. With housing, this is a fuzzy process as all properties are not equal even with identical floor plans. For instance, in a condo complex, identical floor plan units will have different views, be in different conditions and be in different locations in the complex. Prices will always vary for identical units regardless of market direction. Just running the sales numbers does not give an accurate picture of market direction and a single selling price up or down may not indicate a trend reversal. I'm making two points here; one- that predictions are just that and should be taken with a grain of salt and, two- the bottom in prices will only be recognizable from the rear-view mirror. And, as I've said before, Ms. Bottomfeeder doesn't buy the market. She buys a specific property. That property type may lead or lag the general market.
Another twist in the bottom-searching strategy is that, for buyers looking for a specific property type, the supply of available matching units could skew the bottom for that property type years away from the general "market" bottom. A buyer looking to buy a non-waterfront 2/2 unit close to the beach will probably have multiple chances to steal a unit during the time of peak pain because of the high number of matching units. On the other hand, someone looking for a steal on a 4th floor or higher 2/2 direct ocean will have far less chances because of the much lower number of matching units. Narrow the search down with specific complexes and/or criteria like tennis courts, garage, pool and the choices shrink even more. For those looking to buy a Sand Dollar floor plan Stonewood on a high floor the lowest price sale could occur well before the market bottom when the only distressed seller offers her unit or, if no owner is distressed, those limited-supply units could skate right through a down market without a single low sale. Ask your buyer's broker about the reality of your expectations in case, like Diogenes, you may be embarking on a fruitless search.
My best advice to buyers is to not trust any predictions or bottom calls and try to be realistic about your expectations of a "deal". I think we can safely say that prices in Cocoa Beach and Cape Canaveral are not going to zero. Accepting that, and considering the 50%+ retracement in some prices, we can safely say that purchasing now, in most cases, carries far less risk than at any time since 2005. Is it still possible to overpay? Absolutely. I am still of the opinion that the new, luxury condo market presents considerable downside risk. The large number of unsold new units, tepid sales pace and the number of units being offered at less than their recent purchase price when new are evidence of an unhealthy market segment. Existing, older buildings are in a much different place. Many sellers, having purchased years ago, have a low basis and can be aggressive with their pricing. Example; looking for a direct ocean 3/2 between 2000 and 2100 sq.ft. in Cocoa Beach, I can find 8 units offered. The choices range from a 17 year old, 2nd floor unit for $359,900 to a 3 year old, 4th floor for $849,500. The newer unit, to be sure, is far nicer, but, a cool half-million dollars of difference is hard to justify. Be careful out there if you're purchasing. Opportunity abounds but risk is still present. You will be well-served to hook up with a well-informed and realistic buyer's agent, if you can find one, to help navigate the market. If your agent tells you the market has bottomed and it's a great time to buy, be skeptical. While both may be true, such a statement is too self-serving coming from a real estate agent to fail to light up the warning panel. If you do find a steal, congratulations and welcome to the best little beach town in Florida. Now, slow down, relax and enjoy life by the sea.
You are meant to play the ball as it lies, a fact that may help to touch on your own objective approach to life. ~Grantland Rice
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