Another Day - Another Record

Real estate inventory in Cocoa Beach and Cape Canaveral continues to set successive all-time low records. This morning there are a total of 226 condo and townhome units for sale in our two cities. Half of those have been for sale for three months or longer and fully a third have lingered for over half a year. We can safely assume that these are what I call "not really for sale". In this market, if a property is priced close to fair value it will sell quickly. I have seen some units sell recently for more than what I considered fair value so taking a stab at over-pricing does have some merit if a seller isn't in a rush. If the unicorn buyer hasn't shown up after three months, it's time for a seller who really wants or needs to sell to get realistic. The market is always right.

There was another record set this week. After hovering around 7 to 9% of the total units for sale for about a year, our distressed inventory (short sales and foreclosures) plunged this week to just three percent of the total. Out of the 226 units for sale, six are bank-owned and for the first time since 2007 there is but one short sale condo in Cocoa Beach and Cape Canaveral. On inventory in general, our bread and butter property type has always been direct ocean units with at least two bedrooms and two baths above the ground floor. Buyers looking for one of these units asking less than $300,000 have zero to consider this morning.

It is just as tight in almost all property types. There are 63 total single family homes for sale in Cocoa Beach and Cape Canaveral. Buyers looking for a waterfront single family have 27 to consider, none of them distressed. If the budget peaks at half a million dollars, there are but ten on the list. Buyers, you better have a direct MLS link and/or a buyers agent who is on the hunt for you if you hope to score the property you want. There are others looking for that same property and they may be able to move more quickly. Need a buyers agent? Contact me. By the way, 67% of all condos closed in our two cities so far this year have closed for cash.

How do you know there's a drummer at the door? The knocking keeps speeding up and slowing down. How do you REALLY know there's a drummer at the door? Your pizza has arrived.

"Everyone is a genius. But if you judge a fish on its ability to climb a tree, it will live its whole life thinking it is stupid." ___Albert Einstein

A Timeline of Disaster and Recovery

I began writing this a year ago in 2014 when the Magnolia Bay project in south Cocoa Beach finally sold out after a grueling decade of drama and hardship. I decided then to wait until the dust had settled before posting it. Now seems as good a time as ever.

----------[ from spring 2014 ]

Something happened last week in Cocoa Beach for the first time in almost ten years. The number of units offered by the developer at Magnolia Bay returned to zero. The very last one was contracted. It was a crazy, ten year roller coaster ride. Much money was lost, homes and businesses were lost and yours truly got yelled at a few times.

It was 2004 and flipping real estate was the national pastime. The most profitable niche in our local market was buying pre-construction contracts. It was possible at most projects to put down 10% to reserve a unit and then ride the runaway appreciation for a couple of years before either closing or selling the contract for a profit. Tripling and quadrupling the investment in a year or two was the norm. There were $18,000 reservations at Portside Villas that profited $100,000. There was so much demand for pre-construction that one major developer held drawings to pick names of lucky buyers who were "permitted" to reserve a unit. Timing was everything. An investor stood to make the greatest gain if he could have the longest time from reservation to close. As we found out later, he also had the greatest exposure to ruin. A few lucky contract holders at Sol y Mar and Almar in south Cocoa Beach got a profitable bonus when the City of Cocoa Beach imposed a construction permit hold for about a year before those buildings got started.

The easy money was pretty much finished by 2006 in Cocoa Beach and Cape Canaveral. Pre-construction contract holders who hadn't flipped by then were faced with a dilemma; go ahead and close for an immediate paper loss or walk away from their deposit. In almost every case, walking from the deposit was the wiser move. The projects that closed after 2006 turned out to be disasters for the buyers who chose to close. A few developers and banks suffered huge losses as well. The area of south Cocoa Beach outside the city limits was especially hard hit with unfortunate timing for multiple projects.

Magnolia Bay was supposed to begin early in the decade on a big parcel of riverfront in south Cocoa Beach between Jack Baker's Lobster Shanty and the River Falls subdivision. It was an overgrown snarl of vegetation and mangroves with a secret homeless camp hidden in the middle. The residents of the River Falls subdivision mounted an organized opposition to the planned project that resulted in several emotional County Commission meetings. I was verbally attacked by angry homeowners because I dared to speak on the developer's behalf to the Commission. For me it was less about the project getting approval than it was about the hypocrisy of the opposition. Most of the vocal homeowners were living in an area that had just been developed a few years earlier on a similar piece of riverfront land. "I've got my house. Now, no more construction."

The Commission eventually approved the project with a concession on height of the closest building to the subdivision and a planting of screening vegetation. (Interestingly, that screen is not in evidence today in 2015) The delay would prove to be disastrous. Construction began and business at the nearby Express Grocer exploded from the influx of construction workers. This in addition to their regular business from the little trailer park next door made life good for Sam, the owner, and Gary, the long time clerk. I can still remember the sign posted on the door one day: "Gary is not allowed to give credit anymore.  signed, Sam"

Pre-construction units at Magnolia Bay were first offered in 2005 from $549,900 to $899,900. The lowest prices were for the five Plantation units on the 1st floor in the middle C building. The highest prices were the two top floor Signature units at $899,900. The corner Savannah units in the C building were $689,900, $729,900 and $769,900, prices climbing with the floor number. Even with the heady prices being paid for new condos at the time, this was rarefied air for non-oceanfront units.

The first group of reserved units began closing in January of 2007 at the pre-construction prices with eleven units closed that year and three the following year. By that time, the real estate crash was the headline of the day and fear predominated. I have no idea how many buyers walked away from their pre-construction deposits rather than close. Although painful at the time, that decision would prove to be prudent for those who did. The last unit to close in 2008 was the first to close for less than the pre-construction price. At the new reduced prices, four more units closed in 2009 with two Plantation units going for $370,000. By the end of 2009 the first short sale was in the works and it (2nd floor Plantation) closed in December 2010 for $300,000 as did another short sale Plantation that set what was to be the lowest sold price at the complex, $295,000 for a 1st floor (above the garage) unit. Plantation units have sold since for as much as $418,000. None have yet approached the what now seems crazy high pre-construction prices.

As I finish writing this in April 2015, there are three re-sale units offered, two Plantation units asking less than $370,000 and a Savannah corner for $455,000. Market dynamics suggest to me that we'll continue to see rising prices here though I doubt that I'll live long enough to see them get to pre-construction levels again. Sam and Gary don't care either way. Express Grocer is gone for good. I wish them well wherever they are. The site of the old trailer park next door sits empty, the residents and trailers moved out for a townhome project that never materialized, victims of timing and the market crash..

Just across the highway, after years of no new construction in south Cocoa Beach, pre-construction units are today being offered at two new projects. Prices start at $800,000 for oceanfront units at Cocoa Cabanas with construction well underway. Time marches on.

"I feel bad for the homeless guy, but I feel really bad for the homeless guy's dog, because he must be thinking 'Man, this is the longest walk ever.'" ___Norm Macdonald

When's It Gonna Pick Up?

I hear it from waiters, snowbirds, random golf partners, neighbors, past clients, the guy dipping bait at the marina. They all ask the same question; "When's the market gonna pick up?" The accurate short answer to the question is "six years ago".

In Cocoa Beach and Cape Canaveral the number of sales bottomed in 2008 and that number has increased every year since. I have to go back 118 months to June of 2005 to find a month in which more condos closed in our two cities than in March of 2015. I think it's bound to slow down soon because of the record low inventory but so far my prediction of that happening has been premature.

If the question was "When are prices gonna get back to the highs?", my answer would have to be "Almost certainly not for a long, long time." Example: a two bedroom, two bath riverfront Cocoa Beach condo that closed two weeks ago for $170,000 sold in March 2005 for $292,500. That's a lot of appreciation to get that one back to it's high. Another direct ocean 2/2 unit that closed last month for $360,000 last sold in March 2006 for $545,000. Those two are fairly representative of the price recovery progress of most condos. Anecdotally, the rapid rise in prices that we've been seeing for the last few years seems to be slowing down. We actually had a couple of closed condos in March that were at prices below what they sold for in 2011 and 2013. The slowdown is a healthy development although probably not welcome to sellers who have been holding out for higher prices. Those sellers playing the waiting game should make themselves familiar with their real cost of waiting and what amount of appreciation it takes to make waiting profitable and how likely that is to happen.

I got a little ahead of myself talking about the end of snowbird season. There appear to be larger numbers than usual who have extended their stays past Easter. Traffic has lightened considerably since Easter but is still heavier than normal for this month. Local golfers,  the business league at the Cocoa Beach Country Club resumes for 2015 next Tuesday, April 14. Join us. Tee off anytime between noon and dark. Everyone is encouraged to participate and to occasionally look over their shoulders at the group following. You know what they say, "While we're young."

I dipped a few gallons of the Oak Hill reds in the photo one night this week. Fun to catch and fun to eat.

“The best minds of my generation are thinking about how to make people click ads”
___Jeff Hammerbacher

Beneath the Surface

Icebergs and alligators; the greater danger is usually hidden beneath the surface.

And just like that, the season is over. Easter Sunday began early with crowds on the beach in several places for sunrise services. The weather cooperated with perfect conditions as the sun rose into a clear 71 degree sky as the full moon set over the Banana River.

March 2015 in the Cocoa Beach real estate market was, without exaggeration, gangbusters. There were 73 closed condos and townhomes in Cocoa Beach and Cape Canaveral and 15 single family homes. Eleven of those were distressed, short sales or bank-owned. Another 96 properties that haven't closed yet have gone under contract since March 1, twelve of those distressed. For sale inventory this morning is scary low in condos with only 236 condos and townhomes left for sale in the two cities. Single family home numbers are a little better at 72 listings. Only 7% of the total for sale listings are distressed.

On a side note; many of the current listings are way over-priced. This is more true with oceanfront condos than any other property type. To the 18 aspiring record setters out there priced above the highest recent $/sf sale, consider that only two units have closed in the last six months for more than $300 per square foot and both of them were super-nice units in luxury, newer buildings. All 18 of the units priced above the highest one are beautiful and desirable but all 18 of the sellers are going to have to modify their expectations if they really want to sell. Those dreaming of over $400 per square foot will have to be content with dreaming. I guess you can't win the lottery without buying a ticket. Asking $400 per square foot for any oceanfront condo in Cocoa Beach in 2015 has about the same chances of success as buying a Powerball ticket. Not impossible but pretty close to it. Fully a third of these pie-in-the-sky sellers are in the same building. They are apparently reinforcing one another's impossible dreams. Talk around the pool must be interesting;

"Any nibbles on your unit?" 
"No written offers but several showings and feedback has been good. You?" 
"Same. We might raise the price after Easter. Larry says market is on fire."
"Yeah. Us, too. Did you see what Remrem is asking for his? We might be too low."

I get asked why an agent would take an impossibly over-priced listing. Sometimes, it worth having a too-high listing at a busy spot just for the sign exposure. In 2015 there are even better reasons not to decline an over-priced listing. With the recent evolution of online real estate, every listing an agent has generates traffic and inquiries from several dozen real estate websites. It can be good for a listing agent to have over-priced listings if she can sell other fairly priced listings to the inquiries she gets from Zillow et al for the too-high ones. Don't count on a listing agent to refuse a listing because it's too high. It's still good for business. Sellers who want to sell need to know what the market has recently been paying for comparable properties. If they price accordingly they can expect to pick up a check in a reasonably short time. If they ignore the comps and list for a crazy over-the-market number, at the very least they get to enjoy the fantasy of their unit being worth $too-much (around the pool). A check, however, will not be forthcoming.

Whether you're buying or selling, if you'd like an idea what a property is worth right now, I'm happy to give you my opinion. I'm not an appraiser but I am an involved market participant and a committed statistician who has been studying, slicing and dicing our small market for many years. I know this market like very few.

While I wasn't paying attention this blog had it's tenth birthday last month. Since March 2005 I've published 509 posts (and written a few dozen others that didn't make the cut for whatever reason or controversy) and we've had 293,211 visits to the blog, half of those in the last three years. The Cheerleaders and Bad Haircuts post warning about NARs ill-timed, self-serving Time2Buy campaign in 2007 has been read 1434 times making it the most read post of all. Thank you to all who've read, commented and/or emailed over the years. I've enjoyed it all. Plenty more to come. It's probably time to ruffle some feathers again.

"Remrem is a fine soldier and a gentleman but a cubit of his company can stretch a league."  ___Wilbur Smith from Desert God. [Apparently chatterboxes are not a modern phenomenon.]