Tuesday, March 26, 2013

March Madness

Easter week. It's the busiest week of the year in Cocoa Beach. We still have our snowbirds who have been here for the entire season, spring breakers, families with children on spring break, high school and college baseball teams and families and the random couple escaping the deep freeze up north for a few days. Two more weeks and it will all be very different. School will have resumed and the snowbirds will be well into their annual northward migration. No tee times will be necessary at the Cocoa Beach Country Club and rates will be halved. An outside table on the deck at Coconuts on a beautiful sunny day will be there for the taking with no wait. And waiting for more than one traffic light change anywhere in Cocoa Beach will once again be a thing of the past.

Sales so far in March have been very strong in Cocoa Beach and Cape Canaveral with 52 closed condos and townhomes and nine sold single family homes. Of the closed sales 28% were either short sales or foreclosures. This is a reflection of the contracts in the system that finally worked their way to closing and not indicative of the currently for sale inventory. Of the 370 total residential properties currently for sale on the Cocoa Beach and Cape Canaveral MLS only 8% are short or foreclosed. The few new foreclosure listings that are hitting the market are attracting multiple offers the first few days in most cases. Only three of the 12 closed foreclosures this month sold for less than asking price. A couple closed for more than 10% above asking price.

If you're still looking and hoping to steal something, you will likely be disappointed. That said, current selling prices are so far below recent years that buyers shouldn't be deterred by having missed the exact market bottom. As always, know the current value of the properties you're considering and be realistic and speedy with your offers. In a few years it is very likely that we'll look back at 2013 as having been a great opportunity.

"Spring is nature's way of saying, Let's party." __Robin Williams

Friday, March 15, 2013

Happy 8th Anniversary

Beach restoration south Cocoa beach 2005
I just realized that this month marks the 8 year anniversary of this little real estate blog. In the 8 years I've been commenting on our market I've written 389 posts and angered scores of listing agents, developers and other market participants. Those same not universally loved comments have also initiated contact from hedge funds, banks, troubled developers and various members of the media. Not one of them realized the oracle was wearing flip flops until the first meeting. Hey. Whatcha gonna do? My shining moment of the last eight years, however, has to be the time I was accused straight-faced by a local lender as being the reason via this blog for the market crash. I may not have crashed the market but I will take credit for torpedoing more than one deal. All this because I write honestly about what I see happening in the Cocoa Beach real estate market. Expect more of the same, hopefully for at least another eight.

What's changed since then? When I began writing in March 2005 the market was poised for a meltdown but it wasn't apparent yet. We had never heard of short sales and there were zero foreclosures for sale in the two cities. There were 200 new condos either under construction or about to break ground just in the 3/4 mile stretch from Patrick Air Force Base to 18th Street South. It was to be a disaster for all of them except the one building that was never built, Cocoa Cabanas. They are still threatening to build, by the way. Magnolia Bay was set to break ground the following month and the announced 77 units were offered pre-construction starting at $549,900. Many of the pre-construction buyers eventually walked away from their 10% deposits but they lost less than those who went ahead and closed with an instant six figure loss. The fourth building was never built. It was a story to be repeated at all the other new buildings in the once-sleepy southern stretch of Cocoa Beach. Another boondoggle soon to be announced was the Enclave between 3rd and 4th Street South with an original plan of 24 zero lot line single family homes starting at a million dollars. Only 12 were built and several of those eventually sold for less than a half million. For the record, it was true then and as is still true today, no non-waterfront home has sold in Cocoa Beach for even close to a million dollars. For anyone to think they could sell, not one, but 24 for more than a million bucks seems incomprehensible. Those were heady, optimistic and greedy times.

At the same time in March 2005 pre-construction buyers were flipping contracts at Portside Villas for 5 to 7 times their investment. Similar, although not quite as lucrative, activity was happening at Solana on the River, Mystic Vistas, Majestic Bay and Puerto del Rio among others. The coming months were to see tens of millions in evaporated money for those unfortunate enough to be among the buyers of the flipped contracts or those who closed on those contracts rather than flip for a profit. Prices of individual units in some complexes eventually sold for a quarter of the number they were bringing in 2005, e.g., Perlas del Mar and Sea Spray Townhomes.

In early March 2005 the national average 30 year fixed rate mortgage was 5.77% and climbing and scrutiny of the borrower and the property was practically non-existent. Rates topped 6% by month's end. Inventory was still relatively low with around 400 condo units listed for sale in the Cocoa Beach and Cape Canaveral MLS and less than 45 single family homes. The condo inventory was top heavy with over 110 units asking over a half million. This  warning sign was ignored by almost all market participants. Inventory was about to blow up with total number of condos for sale almost tripling in a year's time as prices tumbled.

 Things have changed. MLS condo inventory is at 317 total units for sale this morning. Magnolia Bay and most of the other once-troubled complexes are on solid footing with most or all units sold. (There are a couple of exceptions in south Cocoa Beach.) The national average for a 30 year fixed rate mortgage  is 3.52%. Scrutiny of borrowers and the collateral property is now as invasive and thorough as a prostate exam. The Space Shuttle is no longer flying and Kelly Slater has been world champion five more times since that first blog post. The downtown sidewalks that were concrete in 2005 are now pavers and rowdy beach-goers are more likely to be accosted by a fired up old dude on a power trip in a Beach Ranger shirt than a cop. The locals on the deck at the Beach Shack have not noticed any change at all. Through it all, Cocoa Beach is still my pick as the best little beach town in Florida.

"I always wanted to be somebody, but now I realize I should have been more specific." ___Lily Tomlin

Wednesday, March 13, 2013

No Harm, No Foul?

I'm getting a little weary of real estate websites misleading consumers. That it appears to be intentional deception is also troubling. I get a handful of inquiries every week about listings that someone found on Trulia, Zillow, Homes.com, Realtor.com or one of the many other aggregator real estate sites.

Where do these websites get their listings and how do they make money? They get most of their listings directly from the local MLS systems which give them free access to the data. They then repackage it and display on their sites. They generate revenue by selling advertising back to the listing agents and other advertisers. They justify their rates by number of page views. This is where the suspected deception comes in. It is in their best interest to have as many listings as possible to generate the most page views possible. New listings appear on these sites almost immediately. Sold or withdrawn listings can linger for years continuing to boost total page views which justifies advertising rates. Why is this? The same technology that puts a new listing up immediately should be removing the sold listings equally fast. By design? Your guess is as good as mine but where there's fire...

I received an email yesterday from someone interested in what appeared to be a "smoking deal" listing on one of these sites. The price was too good to be true. I immediately questioned it as I knew there hadn't been a listing in that complex near that price in years. Turns out that the condo was first listed on the MLS at $149,900 in December 2010 as a short sale. It went under contract in three days and came back on the market in June 2011 at $160,000, "bank-approved" price. Presumably that buyer walked at the $160,000 counter from the bank. It closed in August 2011 for $170,000. It is still on the offending site this morning showing up as a "featured" active listing asking $149,900. Also shows as being on the site for "180+" days. True that. Apparently they also have a sense of humor. It has generated 7154 page views, presumably almost all at a time that it wasn't available for sale as it was actually "on the market" for a total of six days.

I ask myself who is being harmed here. Certainly not the agents who are advertising on the sidebars of these deceptive listings. They probably have nothing to do with the listing status nor where their ads appear. They are getting emails and phone calls from consumers who believe these listings are real so they benefit. The websites benefit because they continue to generate ad income from the happy agents who are getting inquiries that they can steer on to other listings. I guess I'm concerned for nothing. The consumer eventually gets another property, the agents, advertisers and the website owners make more money and all that is wasted is a little time on the front end explaining away the loss-leader listings.

I guess what I'm really concerned about is the negative impact to the reputation of the entire real estate industry and my own by unfortunate association. Ours is not the best reputation for well-deserved reasons. With a burden of shenanigans during the boom years including NAR's self-serving "Time to buy" ads at the precise beginning of the crash, we don't need further hints to our possible dishonesty. All I can do is complain here publicly and conduct myself as my mother would approve.

Buyers, forget all websites for property searches other than the MLS itself. There you have full access to all listings and, surprise, they are updated in real time. That listing that I profiled above showed up on the MLS for exactly six days, the time that it was really for sale. Your link for all property searches is BrevardMLS.com Contact me if you find one that interests you and I'll fill in the blanks. Happy hunting.

"You can lead a horse to a picture of pretty water but you can't make him drink. You can however, get him to drink some not-as-pretty water if the first picture made him thirsty enough." __Larry

Saturday, March 09, 2013

When Words Just Aren't Enough

I'm a fan of well-written real estate listings. I'm also a fan of poorly-written real estate listings. The latter are more fun to read. Listing agents have a limited amount of space available to best describe their listings and must make good use of the four lines of text shown in the MLS. Looking at a few listings I see one that has been on the market for 2344 days. That's more than six years. Some of the words that appear in this property narrative are; "alluring, well-appointed, luxurious, functional, welcoming, expansive, modern, elegant, spacious and state-of-the-art". Unfortunately for the seller, the agent's bucketful of superlatives has not been enough to overcome the optimistic price.

Another over four year old condo listing includes the wording, "THE BEST BUY IN COCOA BEACH". It's been at the same asking price since January 2010 with no takers. How about another condo listing whose description begins with the word "FANTASTIC". It's been at the same price since June 2009 and on the market a total of 2362 days. Reason? It's the price, silly. Another multi-year listing is described as "stunning" and "gorgeous". These powerful and pretty words are having a hard time overcoming the fact that the unit is priced $400,000 above what the identical unit next door closed for recently.

In the last four weeks 14 condo units have closed that were on the market less than one month. Some of these listings used similar superlatives but the descriptions were not the reason they sold so quickly. It was price. The real estate market in 2013 is almost completely transparent. The data are there for everyone. Determining fair market value for a property is within everyone's grasp. The days of polishing a turd with a glowing description and getting way above market value are gone. The price of turds, polished or not, is public knowledge. Sellers, if you price your property within striking distance of what the data tell you is current value, you won't need to employ overkill in your description. In this market priced-right listings are selling and are selling quickly.

The winter storm that dumped so much snow on the northeast this week has also delivered a powerful swell to Florida. As soon as the storm was off the coast of New England it began generating a swell that first arrived in Cocoa Beach yesterday and is expected to be with us through late next week. The 20 mile buoy is reading 8.5 feet with a 13.8 second period this morning. That's a big powerful ground swell and the beaches are all firing this morning with well over head high sets in south Cocoa Beach, smaller the further north. It's expected to build through tomorrow. The surf contest at Shepard Park this weekend will enjoy powerful conditions. Keep an eye on the kids if you go to the beach. Conditions are treacherous for swimmers. Surfers check your leashes and expect to see some broken boards like the one pictured above. Stay safe and enjoy the ocean's bounty.

"Half the work that is done in the world is to make things appear what they are not." __E.R. Beadle

Monday, March 04, 2013

Thoughts about value

I spend at least part of every day looking at recently sold properties to try to determine the fair market value of other properties. It may be for someone who is thinking of selling and wants to know what they can expect to get for their property in today's market. More often it is for a buyer who is preparing to make an offer. In most cases in our market it is fairly easy to determine a fairly close idea of current market value. That doesn't mean that asking and offering prices will have any basis in reality. There is a strong contingent of unreasonable parties on both sides of the fence willingly dismissing the comps. These unreasonable parties rarely face one another across a closing table for obvious reasons.

All property sales involve at least two differing opinions about a property's value. The asking and offering prices will usually include factors other than just that person's opinion of fair market value. All sellers want to believe in the existence of an uninformed buyer who is willing to overpay. All buyers believe that there is a motivated seller somewhere who will sell his property to them below fair value. Both are sometimes right. What is far more common is that the non-distressed sale of a property will happen very close to fair market value for that property. With property sales records easily accessible online it is relatively easy for anyone with internet access to determine a fairly close idea of fair value for anything but the most unique properties.  Since comps are rarely exactly like the subject property, some adjustments usually have to be made to determine a close guesstimate of fair value. That means that the exact current value can't be determined, only a close range. A sale is going to involve some modification of opinion on both sides.

Typically a reasonable seller will look at the comps, make adjustments for differences and then list their property above that number to allow for negotiating room and/or the outside chance that an uninformed buyer will overpay. A reasonable buyer will look at the same comps, make similar adjustments and then offer below their opinion of value to allow for negotiating room and the outside chance that the seller will just accept their first low offer. If reasonable negotiations ensue a number somewhere in between is usually reached and a sale happens.

An unreasonable seller will dismiss the comps and list at a much higher number. It may just be an arbitrary amount that they've decided they want or it may be a specific number that they need. With these types of sellers, a rational argument for the fair price based on comps is a waste of time. Likewise, an unreasonable buyer will also dismiss the comps and make an arbitrary low offer that will get either an angry rejection or no response. These unreasonable parties are fairly active in the market just not in the closing rooms.

If you want to sell or buy a property, run the comps and set your asking or offering price accordingly. Hoping for that uninformed other party is, in most cases, just going to prolong the process. One other note; Don't dismiss comps that aren't in line with your expected number. If you're a buyer, you can't just use the low comps and ignore the high one. Likewise, sellers. That low sale next door is relevant whether you want to believe it or not. You know I'm talking to you, Mr. Listing Agent. You embarrassed yourself when you responded to my fair offer last week with a comp in another building while ignoring the identical comp on the same floor in the same building. Not to mention not even being aware of the most recent sale in that other building that also confirmed that our offer was right on the money. If your seller is unrealistic, just admit it. I realize that some agents' business plan involves taking over-priced listings and hoping that with time the market will beat their sellers into a more reasonable state of mind. That's fine. Just don't try to justify a crazy price with cherry picked or unrelated comps.

Every seller's and buyer's agent should be running comps for their clients when the moment of setting a price comes. If your agent isn't doing this for you it may be time for his pink slip. If you want a reasonable idea of what a particular property is worth contact me. I'll tell you what the comps suggest. What you do with that knowledge is up to you. Doesn't mean you can't dream. That redneck lottery winner who hasn't hooked up the internet connection yet may be the next one to view your property and might pay you double what I just told you it was worth. Lightning does occasionally strike.

"Reality is wrong. Dreams are for real." ___Tupac Shakur

Friday, March 01, 2013

Million Dollar Gator

A dangerous reptile similar in size to the one above ignited a chain of events that traumatized at least one non-Floridian, changed the direction of several people's lives and left a trail of close to a million dollars of failed real estate closings and lost income in his wake. It began the day before two scheduled closings this week. The first was on a waterfront home in Melbourne Beach and the second on a waterfront condo in Cocoa Beach. The sellers of the home were also the buyers of the condo. Their contract to purchase the condo was contingent upon the successful closing of their home. The buyers of the home, who were from somewhere north of the Florida state line, had completed inspections, the mortgage was approved and they were set to close the following day. They arrived to do their final walk-through. A small alligator, oblivious to the human world, had chosen that particular sunny afternoon to soak up the warmth along the lakeshore within sight of the backyard. The soon-to-be-relocating-to-Florida couple spotted the reptile and one of them, pardon the vernacular, freaked out and called the next day's closing off. That, of course, torpedoed the closing of the condo.

The aftermath: Two families who thought they'd be moving this week are back in limbo. Two properties are back on the market. One of the two families is probably having a soul-searching discussion about their relocation to a tropical state. A title company will not be paid for two title searches and preparations for two closings. A mortgage company will not collect their fees (other than those related to application) even though loan officers, processors and underwriters spent hours on the mortgage. Three real estate agents will not collect pay checks although every task related to a sale other than the signing of the closing documents had been completed. Two sellers are changing their possibly life-altering plans and probably quite a few other as-yet unknown dominoes are teetering. All because one of the estimated 1.3 million alligators in Florida chose a particular moment and place to warm his reptilian blood. Bad gator.

"I am a bundle of nerves riddled with irrational fears."  __Tori Spelling