Wednesday, August 31, 2011

Inventory breakdown

I didn't have any reason for choosing the categories below other than whimsy. We are feeling the supply squeeze in several areas of our market as the numbers illustrate.

Cocoa Beach and Cape Canaveral MLS - August 31, 2011
Condos and townhomes for sale
short sales______48
Total all prices__360

Condos sold since January 1, 2011
short sales_____60
Total all prices__373
Single-family homes for sale
non-ocean waterfront__32
short sales__________4
Total all prices_______73

Single-family homes sold since January 1, 2011
non-ocean waterfront__41
short sales__________18
Total all prices_______98

I never keep a scorecard or the batting averages. I hate statistics. What I got to know, I keep in my head. __Dizzy Dean

Sunday, August 28, 2011

After the storm

Last week RealtyTrac published it's findings about foreclosure and distressed sales for the second quarter of 2011. According to their release, "sales of homes that were in some stage of foreclosure or bank owned accounted for 31 percent of all U.S. residential sales in the second quarter of 2011, down from nearly 36 percent of all sales in the first quarter." In Florida the number was 35% of all second quarter home sales trailing six other states. Highest level of distressed sales was Nevada with a whopping 65% followed by Arizona 57%, California 51%, Michigan 41%, Georgia 38%, and Colorado 36%. Florida at 35% was just one percent more than Michigan at 34%.

Looking at the MLS data for Cocoa Beach and Cape Canaveral, 26% of all Q2 sales of residential properties were distressed putting us in the same range as Virginia and Washington state. As of this morning August 28, distressed properties make up just 14% of total MLS residential inventory in the two cities.

My numbers for our market, because I've used only the MLS data, are probably slightly different than the numbers would be using the RealtyTrac methodology. However, because I suspect that private, non-MLS sales are probably skewed more towards non-distressed sales than the other way, my numbers may actually overstate distressed activity as a percentage of total sales. Because they do contain the lion's share of sales I trust that they reflect the local reality. Draw your own conclusions.

I hope all of you in the Northeast make it through Irene unscathed with no residuals except a good story. Most of us here are moving a little slower this morning after two days of epic surf. Stay safe.

One machine can do the work of fifty ordinary men. No machine can do the work of one extraordinary man. __Elbert Hubbard

Sunday, August 21, 2011

August half-time report

August property sales have somehow maintained (so far) the strong pace of the first half of the year even with a rapidly declining inventory. Of the 41 closed residential sales posted in the Cape Canaveral and Cocoa Beach MLS as of this morning, August 21, 27% were distressed, five foreclosures and six short sales. Ten of the 41 sales were single family homes, all in Cocoa Beach and all but one waterfront. Two were direct ocean, one a 50 year old cottage with small guest house that sold for a shocking $415,000. Small and needing work but wow, $415. I would have expected a bare lot on the ocean to bring more than that.

Surprisingly, with 30 year fixed rate mortgages at an all time low (4.15% national average) cash is still king and almost the only game in town where condo sales are concerned with 81% closing with cash. The majority of single family homes are also selling for cash with only four of the ten home buyers getting a mortgage. I suppose that property at depressed levels is a more attractive parking spot than equities after the hammering of the stock market in the last month.

Inventory this morning stands at 369 condo and townhome units in Cocoa Beach and Cape Canaveral and 77 single family homes. Of the single family homes for sale, 39 are waterfront, exactly the number of waterfront homes that have sold in the last six months.

I'll get into specific August sales of note in a later post. Highest forecast temp for the next ten days is 90 and that's just for one day. We look to get some effect from Tropical Storm Irene next weekend which is expected to be a hurricane by then. Tis the season. Off now to enjoy some waves from the persistent small swell that's been hanging around for what seems like weeks. If you have any questions about property or have anything to share about our market shoot me an email to Peace.

Efficiency is intelligent laziness. __David Dunham

Sunday, August 07, 2011

Notes from the field

In December 2007 the owner of a top floor (5th) direct ocean 2/2 unit in Cape Canaveral listed his unit for sale for $399,900. Two direct ocean units had already sold in the building that year, both ground floor and both for at least $125,000 less than his asking. The following year 2008, two other direct ocean units, 3rd and 4th floors, sold for $312,000 and $265,000. He held strong with his asking of $399,900 for his original-condition unit until June of 2009 when he dropped his asking to $350,000. Three months later another ground floor unit closed for $210,000. Unmoved, he held firm until February of 2010 when he dropped his asking to $320,000. The following month, March, two nicer 2nd and 4th floor corner units closed for $250,000 and $240,000. He responded by dropping to $299,000 in April. In November another corner unit closed for $250,000, this one top floor. His response was to drop to $274,900 in December. He dropped again to $260,000 asking price in February this year and watched as a much nicer top floor unit closed for $225,000 last month before finally accepting an offer this past week, price unknown. He refused an offer of $295,000 from one of my clients at one point during the saga.

Here's another very interesting history of an attempt to sell a single family Cocoa Beach home. Our story begins in November 2003. Prices are the MLS asking price.

Nov 2003 - $579,000 original listing agent
Dec 2004 - $749,900
Feb 2005 - $829,000
Mar 2005 - $869,000
May 2006 - $949,500 new listing agent
Jun 2006 - $898,000
Nov 2006 - $868,000 back to original agent
Dec 2006 - $855,000
Jan 2007 - $799,000
April 2007 - $729,000
Sep 2007 - $696,000
May 2008 - $699,000 new listing agent (3rd)
Jul 2008 - $669,000
Nov 2008 - $629,000
Jan 2009 - $599,900 back to original listing agent
Apr 2009 - $589,700
Oct 2009 - $574,000
Feb 2011 - $456,000 new listing agent (4th)
Aug 2011 - $439,000 new listing agent (5th)

This listing has had five different listing agents and eleven different MLS numbers over the years. The MLS right now is showing a total combined days on the market as two.

How about the new condo that, since being completed in 2006, was offered on and off by the developer at prices from the high $600,000s until 2009 when it was listed for $499,000 and stayed on the MLS with steadily decreasing prices until it closed last week for $319,000.

Or the other 92 listings in Cocoa Beach and Cape Canaveral that have been on the MLS for more than a year? That number is probably more than twice that if you include the listings that have had their "days on market" number manipulated downward by resourceful agents trying to disguise the stigma of a high DOM number. Barring a condition that renders a property unsaleable, if it's been for sale for a year without selling, the price is almost certainly too high. says this about denial, "In its full form, it is totally subconscious, and sufferers may be as mystified by the behavior of people around them as those people are by the behavior of the sufferers. It may also have a significant conscious element, where the sufferer is simply 'turning a blind eye' to an uncomfortable situation."

I'm never short (pun intended) of good short sale stories. This was the best of several this week. The listing agent of a short sale called the buyer's agent yesterday with a progress report. The contract was signed by the seller and negotiations with the bank started in April. Listing agent said that the 2nd lien holder had responded wanting more money than the $6000 being offered them by the 1st mortgage lender.

"How much?" the buyer's agent asked.
"They didn't say." listing agent. "I didn't ask but the second mortgage is more than the first."

Hmm. Turns out that some genius at SunTrust signed a subordination agreement on the $450,000 home equity loan that was in first position back in 2006 when the owner of the 2/2 ocean condo went to Amstar for a second loan of $396,000. The result of that subordination agreement was that SunTrust became 2nd lien-holder on their $450,000 behind Amstar's $396,000 1st mortgage position. This could have something to do with SunTrust being so difficult lately with condo loans. You know, barn door slams after the horses have galloped away. I wonder if the Einstein at SunTrust who signed the subordination agreement in 2006, effectively throwing $450,000 out the window, is still employed by the bank. Maybe he's the one in underwriting venting his frustration on new borrowers. On the other hand, the guy at Amstar who demanded the subordination agreement from SunTrust might make a good Federal Reserve Chairman. As smart as his move was at the time, Amstar, or whoever is holding that 1st position note today, is still going to lose $150,000 plus. Hurtful but nothing like the almost half million dollar hit SunTrust is about to take. Incidentally, the asking price of this short sale in April this year was $255,000 or $591,000 less than the amount owed, not including back fees and interest. Think this short sale is getting approval? I'll venture a wild guess of NO WAY.

I wonder how this $450,000 loan is portrayed on the bank's books. It is essentially worthless but it is obviously worth more as an accounting entry than the $6000 being offered by Amstar. The bigger question is how much of this zero-worth stuff is sitting on this and other banks' books.

" The problem with quotes you find on the internet is that you cant be sure how accurate they are." - Abraham Lincoln

Saturday, August 06, 2011

Choose one - condo mortgage or root canal

NASA's mission to Jupiter yesterday.

I mentioned recent increasing scrutiny of condo associations by mortgage lenders in my last post. Just when we thought it couldn't get any more difficult to get a condo loan it did. Tougher rules have been in place for a while now but getting the package through underwriting appears to have just hit a new level of friction. If you're selling, better hope your association management has the required documentation close at hand and is going to be responsive to the lenders often-complicated requests for documents, questionnaires, affidavits and policies. There are management companies that are resistant to Realtors' and lenders' requests for info, often unknown to the very associations that hire them.

If you own a condo and think you'll ever want or need to sell, it would pay to know whether your association will pass the scrutiny of the mortgage lenders. Most of the condo loans I'm seeing now are requiring associations to meet the FHA, Fannie or Freddie standards. Some lenders may make loans in complexes that do not meet these requirements but it makes for a larger audience of possible buyers if your association does pass the test for FHA.

Things will be easier for your mortgage-seeking purchaser if;

  • At least 51% of the units are owner-occupied.
  • No entity or person owns more than 10% of the units.
  • Project is fully complete and not subject to additional phasing or additions, AND
  • At least 90% of the total units are conveyed to unit purchasers other than the developer, AND
  • Unit owners control the homeowners association.
  • At least 10% of the budget provides funding for replacement reserves for capital expenditures, deferred maintenance and replacement cost of major common elements.
  • There is adequate funding for insurance deductible amounts.
  • No more than 15% of the total number of units in a project are 30 or more days delinquent on the payment of their Homeowners Association assessments.

Not meeting any of those items can trigger a full review (think root canal) or can kill the sale. Pay close attention to "adequate funding for insurance deductible" and "at least 10% of the budget provides funding for replacement reserves". If your association has a 10% hurricane deductible on a policy of $3 million dollars then the lender is going to want to see $300,000 in the bank to cover that. If the budget is $700,000 annually, they are going to want to see $70,000 per year being paid into reserves. When an association is voting on the annual budget it is normal for some owners to want to keep monthly fees as low as possible. They may not realize when they vote against an increase in condo fees that they are building an impediment to the future sale of their and their neighbor's units. Funding the reserves at a rate of less than 10% of the total budget or not keeping the amount of the hurricane deductible in the bank might prevent an increase in the monthly fees next year but it also might push your unit into the cash-buyers-only category. Consider your vote carefully.

Selling right now? Don't underestimate the much more attractive nature of a cash offer. A cash deal is much more likely to close considering the current gauntlet of hurdles for a mortgage. If you accept a contract contingent upon a mortgage, be ready to step in and assist in the document request stage and don't pack your stuff until the loan has final approval. My list above is not complete. Requirements are different depending on the lender and type of loan. One constant is the incredible amount of information they want.

My intention here is to prepare condo sellers and buyers for some of the friction in the loan process. Buyers and sellers are successfully closing condos financed with mortgages every day but plenty don't make it to the finish line because they got blindsided by an unknown requirement. To be prepared is better than not. Good luck out there.

"Microsoft isn't evil, they just make really crappy operating systems."
_____Linus Torvalds

Tuesday, August 02, 2011

July wrap-up - running with the bulls

Gopher tortoise galloping across dune line behind Cape Winds condos.

Inventory may be shrinking but July's sales sprinted as if before bulls. There were 45 reported sales of condos and townhomes in the Cape Canaveral and Cocoa Beach MLS in the month. For perspective, that was 12% of the total condo inventory. There were 10 single family homes closed in the month or 13% of the total home inventory.

The lowest priced home sale was in Cape Canaveral, $150,000 for a small 2/2 in Ocean Woods. Cocoa Beach home sales ranged from $190,000 for a 66 year old, 3/2 across the street from the beach in south Cocoa Beach to $600,000 for a nicely remodeled direct ocean 3/2 on an over-sized lot a few blocks south of downtown. Only two of the July sales were canal homes. One was a small 3/2 short sale on Bougainvillea that sold for $280,500 and the other was a beautifully remodeled Snug Harbor 4/2 on Edwards Bay that closed for $400,000 just 7 days after hitting the MLS. Another of the 3 year old Enclave homes sold. This one had 4 bedrooms, 3 baths and had 3462 square feet and a 3 car garage and closed for $510,000. Asking price on this one just a couple of years ago was over a million dollars.

A third of the single family homes had a contract in less than a week on the market and the ten sold for an average of 93.7% of asking price.

The under $100,000 condos were on fire with a quarter of the condo sales landing under the hundred grand mark. Lowest price was $32,000 for a 1/1 Ocean Mist in Cape Canaveral. Other complexes with sales under $100,000 included Star Beach, Atlantic Gardens, Lamp Post, Rio Vista, Riverview Manor, Canaveral Breakers, Four Seasons and Twin Towers.

Other sales of note:

Two direct river Fountain Cove 2/2 units closed for $135,000 (5th floor) and $156,500 (4th floor) and a 4th floor 3/2 sold for $190,000. All three units were in the B building.

A big 3/2.5 townhome w/garage in Cape Canaveral 2 blocks from the ocean sold for $140,100.

Short sale 2/2 Sutton Place in south Cocoa Beach just one unit back from the ocean closed for $105,000. Ocean views from all windows.

Top floor 3/2.5 corner unit Treasure Island direct river w/boat slip, 1827 square feet closed as a short sale for an amazing $150,000.

A short sale 4 year old, 2nd floor Puerto del Rio 3/2 with 1852 sq ft and garage closed for $155,000. Sold for $325,000 new in 2007.

Two foreclosures at Solana Lakes closed in the month. A 1698 square foot 2nd floor 2/2 sold for $160,000 and a 2nd floor 3/2 with 1956 square feet closed for $199,000 which was $6500 above asking price.

A super nice top floor corner 3/2 "D" building Mystic Vistas sold as a short sale for $190,000. Sold new in 2006 for $448,000.

An A building Stonewood ground floor 3/2 sold for $195,000. 1588 sq ft and garage.

A 4th floor NE corner direct ocean La Mer 3/2 w/garage sold for $230,000 with the seller paying $10,000 towards an assessment.

A furnished top floor Shorewood, F building 2/2 with garage and a tiny peek of the ocean closed for $212,500.

A 2nd floor direct ocean Hacienda del Mar 2/2 in south Cocoa Beach sold for $240,000.

Two corner units closed in the month in the 5 year old direct river Garden Bay building. Both were 3/3.5 units with 2600 square feet and 2 car garages. A 3rd floor sold for $305,000 and a 4th floor for $319,000.

We also saw 3 units sell in Magnolia Bay in south Cocoa Beach. A 3rd floor, 2183 square foot 3/3 closed for $359,000, a 2nd floor 3/3 with 2552 square feet sold for $469,000 and a 3rd floor corner 3/3 with 2455 square feet sold for 4380,000. All had 2 car garages.

Second highest condo sale for July was a 2nd floor direct ocean 3/2.5 with 2291 square feet at Ocean Estates in Cape Canaveral that sold for $477,500.

High sale for the month was a 2nd floor direct ocean short sale at Artesia in Cape Canaveral. This 3/3.5 unit had 2478 square feet and closed for $549,900.

Of the 45 condo sales in July five were foreclosures and eight were short sales. Only one exceeded $500,000. There are 41 active MLS units asking over $500,000 this morning with total inventory of condos and townhomes at 380 units. Fourteen of those are foreclosures and 50 are short sales making 17% of our active supply distressed. Only 56% of condo purchases in the month were for cash, a substantial reduction from previous months. There were quite a few owner financed deals in the mix.

On another subject, I am becoming convinced that another big change is in the works for condo mortgages. I have two delayed closings this week because of abnormal documentation requests from underwriters for two different national lenders. Without getting into the ridiculous details, it appears to me that in spite of the already very stringent documentation requirements for Florida condo mortgages, we are about to see a whole new level of friction from mortgage lenders if not outright withdrawal from the Florida condo mortgage market. If you have a condo loan in the pipeline right now you know what I'm talking about. You heard it here first.

"Somewhere, something incredible is waiting to be known." Carl Sagan