Sunday, November 28, 2010

Random observations

Looking west on Minutemen Causeway yesterday.

I hope everyone had an enjoyable Thanksgiving holiday. Weather looks beautiful for the last day of the Space Coast Art Festival in downtown Cocoa Beach and I'll be rejoining the crowds here shortly. It's always a fun time. I crunched a few numbers this morning looking for trends from the almost-finished year. My findings mixed with some random anecdotal observations are below.

Trends in 2010 in Cocoa Beach and Cape Canaveral
  • High-end newer condos saw prices drop significantly closing the gap with older luxury units. We saw sales at Ocean Club, Magnolia Bay, Michelina, Ocean Paradise, Garden Bay and other new luxury developments at numbers hundreds of thousands of dollars below previous asking prices. This pressure on prices will likely abate as supply diminishes but there is more pain yet to be felt at at couple of large, recently completed complexes starting with "M".
  • While mortgage rates hit an all-time low, difficulty in getting a mortgage hit an all-time high, especially for condos.
  • The number of condo sales was up for the 4th straight year.
  • Inventory continued to drop. Now at pre-boom levels.
  • Short sales and foreclosures made up more than a third of all sales. Of these distressed sales, the vast majority were clustered in the sub-$100,000 range. Only 7% of the distressed sales were for $300,000 or more.
  • Of 127 pending sales, 80 (63%) are distressed.
  • Of 586 currently active residential listings in Cocoa Beach and Cape Canaveral only 102 (17%) are short sales or foreclosures. This seems to suggest that once the 80 pending distressed sales close, we may be out of the woods for this cycle. We will, of course, see more distressed sales but likely not at the pace of the last couple of years. It appears the bulk of the weak hands have folded. As always, I could be wrong.
  • Some buildings will continue to buck the trend because of limited supply, strength of owners, age and other factors. Because Mystic Vistas is imploding doesn't mean that Solana Shores owners are going to give away their units.
I welcome all comments, predictions and other observations. It is almost noon and downtown Cocoa Beach is wrapped up in Art Show visitors. I'm out there. Have a good one wherever you are.

The end of the world call, so far throughout history, has been the losing bet.
_________Barry Ritholtz

Saturday, November 20, 2010

repeat: Ten questions for prospective condo buyers

This is repeat of a post from last year that is still relevant. Some of you may have missed it then.

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.

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.

I know that things are getting tougher

When you can't get the top off from
the bottom of the barrel.
_____Green Day

Wednesday, November 03, 2010

October 2010 rundown

Somewhere in Cape Canaveral, November 3, 2010.

Welcome and best of luck to our new Cocoa Beach City Commissioner.

The month of October 2010 saw 45 condo and townhome sales in Cocoa Beach and Cape Canaveral as reported on the Cocoa Beach MLS. Only four of the sales exceeded $187,000 and 40% closed for less than $100,000. There was one lone sale above the half million dollar mark, a beautiful 4th floor southeast corner at the 5 year old Carlyle in south Cocoa Beach. This unit has 2713 square feet, 3 bedrooms, 3.5 baths, a 2 car garage and expansive views over the ocean and the three mile wide Banana River across the street. It closed for $590,000 having sold new in 2005 for $850,000. It was offered for $1.15 million in 2007 with no takers.

The 2nd highest priced sale was a 2502 square foot, 5th floor Diamond Bay of Cocoa Beach. This 3 bedroom, 2.5 bath unit has expansive Banana River views and a big 2 car garage. Sold for $310,000.

A 3rd floor C building Stonewood 3/2 with a side ocean view sold for $280,000.

A direct ocean Canaveral Towers 2nd floor 3/2 closed for $240,000. Fully furnished with two ocean balconies. This is a weekly rental building with excellent income opportunities for owners who choose to rent.

A 2nd floor direct ocean Sand Dunes 1/1 in Cape Canaveral closed for $187,000. It was fully furnished and came with a 1 car garage.

A direct river Bay Club of Cocoa Beach (across the street from the schools on Minutemen) sold for $175,000. This top floor (2nd) corner unit had 1570 square feet, 3 bedrooms, 2 baths and a boat slip. No garages at this small building.

Mystic Vistas in Cape Canaveral was active in October with four recorded sales as of this morning although there may be some others not accounted for yet. The sales so far recorded ranged from a jaw-dropping $130,000 to $187,000. All were 3/2 units between 1994 and 2010 square feet with garages.

Another Perlas del Mar unit closed as a short sale for $161,000. The train of foreclosures and short sales may be coming to an end in this unfortunately timed complex. Every sale in the last two years there has been either a short sale or a foreclosure. As of this morning there is only one unit actively for sale on the MLS. These big, luxurious units sold for as much as $345,000 new a few years ago.

A direct ocean, 2nd floor, 2/2 southeast corner at Windjammer in Cape Canaveral sold for $160,000, quite a deal even though the unit was in original condition. In fact it was such a compelling price for the buyer that another owner exercised their first right of refusal and bought the unit, pushing the original buyer out.

A 2nd floor direct ocean 1/1 at Royale Towers in Cocoa Beach sold for $150,000 fully furnished with garage.

Two more direct Banana River units sold at Pebble Cove of Cocoa Beach. Both were top (4th) floor 3/2 units with 1344 square feet and garage. One closed for $135,000 and the other, in slightly better condition, sold for $146,000. This same unit sold in March of this year at the same price, $146,000.

An Oak Park townhome in Cape Canaveral closed as a short sale for $128,000. Not bad for a four year old 1855 square foot, 4 bedroom, 2.5 bath with 2 car garage. Sold new in 2006 for $299,900.

Two Villages of Seaport 2 bedroom 2.5 bath townhomes sold in the month for $124,000 and $127,000. Both had open parking and were built in 1985. A 1/1 built in 2002 in the same complex sold for $88,000.

Another ground floor lakefront Harbor Isles of Cocoa Beach 2/2 with private garage sold for $120,000.

A Royale Towers C building 1/1 unit on the ground floor closed for $98,000. Had a garage and a tiny peek of the ocean. Sold for $175,000 just three years ago.

Two Banana Bay of Cocoa Beach 2/2 townhomes with open parking closed in the month setting new lows for the complex, one for $90,000 and a foreclosed unit for $68,250.

A four year old 2nd floor 2/2 in Portside Villas Cape Canaveral closed for $89,000. It last sold in 2006 for $195,000.

One of the non-waterfront Four Seasons 2/2 units with open parking sold for $82,500.

Another complex setting a new low was The Diplomat in Cocoa Beach. A ground floor, non-oceanfront 2/1 in need of extensive repairs went for $64,000.

Non-condo residential sales were quite brisk for the month with 14 sales of MLS-listed homes in the two cities. Prices ranged from $105,000 for a 5 year old 2/2 half-duplex with garage in Cape Canaveral to $960,000 for a super nice 4/3 single family on 75 feet of direct ocean beach just south of downtown Cocoa Beach. Cocoa Beach canalfront home sales ranged from $360,000 for a gorgeous remodeled 3/2 with 2373 square feet and pool on Barrello to $201,000 for a 1592 sf home in need of extensive work or possible tear-down on Trinidad.

Deal of the month had to be a 3/2 with 1440 square feet and pool on the canal on Barrello that went for $237,000.

Lowest price for a freestanding single family was a foreclosed, non-waterfront, fixer-upper in Snug Harbor on a .17 acre lot that closed for $123,000.

I've been imitated so well I've heard people copy my mistakes.
______________Jimi Hendrix