Wednesday, October 18, 2017

Into Each Life Some Rain Must Fall

And fall and fall. My tongue-in-cheek comment in the previous post about growing rice on the Cocoa Beach Country Club golf course is looking less snide than realistic today. Cocoa Beach has received over a foot of rain since I wrote that post. My friends and I managed to squeeze in six holes yesterday before rain closed the course once again. The average October rainfall in Cocoa Beach is 4.76 inches. We received 7.3 inches on the first day of the month and, so far, we're at 12.85 inches and counting with over 2 inches yesterday. The silver lining, if you can call it that, is that the Banana River has finally receded enough to accept limited runoff.

Real estate activity has resumed at its typical fall pace since the hurricane with 49 condos and townhomes and nine single family homes contracted since the storm passed. Inventory remains very low with a high proportion of optimistically priced offerings. For instance, $413 per square foot for a 32 year old 2/2 oceanfront condo in mainly original condition or $309 a foot for a 44 year old 2/2 unit with a tiny oceanside balcony and Formica countertops. Neither of these unremarkable units has a garage.

About price per square foot: It is not an exact metric for determining value but is a good starting point. If other 30 to 40 year old units without garages of approximately the same size and condition with a similar view are selling for $250 per square foot then my unit is very unlikely to command $400 or even $300 a foot no matter the depleted inventory. High demand and low supply contribute to rising prices but they rarely induce buyers to pay way above fair value. Finding an agent willing to take an overpriced listing, however, is easy. Agents will take unsaleable listings with the hope that the seller will eventually come to their senses but even without an eventual price drop the listing has value for the agent. Buyers who inquire about the overpriced listing can be shown other fairly priced offerings. An agent's willingness to accept a listing at an unjustified high price is not confirmation of the possibility of getting close to that number. The agent may just be seeing the listing's potential as a good lead-generator. I'm looking at you, side view Cape Canaveral condo in original condition without a garage asking the same outrageous $305 per square foot since last December. Drop the price by 20% and I'm guessing a buyer will materialize.

"How's a beer sound, Norm?"
"I don't know. I usually finish before they get a word in."
__Norm Peterson

Sunday, October 01, 2017

September by the Numbers

It may not feel like it to most Floridans but we get missed far more often than we get hit, thank goodness. The 2017 storm season so far illustrated above.

Three weeks post-Irma and we are gradually getting ourselves back together. The streets of Cocoa Beach and Cape Canaveral are still lined with piles of debris and blue tarps adorn many structures including my office. The administration of the City of Cocoa Beach is operating out of temporary quarters and probably will for a while. The heavy rains the last few days on top of our already saturated ground has the City Manager considering whether to shoot for at least one rice harvest at the golf course while conditions are so favorable. The river remains too high to accept any runoff  so new precipitation sits where it lands.

As expected, sales numbers were off in September as we lost a big chunk of the month to Irma. In September 2016, with no storms, 66 condos and townhomes were closed in Cocoa Beach and Cape Canaveral. This September, just 40. The rising trend of condo mortgages continued with 60% of all condo sales financed. High dollar condo sales were particularly slow with only two sales exceeding $375,000.

Another persistent dynamic is low inventory and fast sales. Over a third of the closed condos sold in less than two weeks. That's to be expected with an inventory of 193 units and an average monthly sales rate of 60. The fast sales are only happening with the units that are listed at fair prices, not the overpriced listings that predominate the MLS. It's not unusual to see sellers take a long shot with an initial optimistic asking price and then reduce when the market doesn't respond. One problem with that is some become married to that crazy number and hang there in Neverland for months. Well over half of all current listings have been on the market for over three months. In a market where a third of listings sell in the first two weeks that is a sure sing of overpricing.

The eleven closed units that were on the market over 90 days had dropped their initial asking price by an average of 7% before selling. Once reduced they sold for an average of 97% of the new asking price. All but one of the 14 units that sold in two weeks or less sold without a price drop. Seven units sold in the month at or above asking price and all 40 closed for an average of 96% of last asking price. This tells me that these sellers weren't willing to accept much below asking price regardless of whether the asking was fair or not. Consider that when deciding on an offering price.

September was an excellent month for waves with a couple of truly epic clean, well-overhead days. We lost some sand to the constant battering but considering the amount and size of the constant swell the erosion was minimal. The beach fishing suffered with this year's mullet run unfishable from the beach during the rough days. I strapped my lifeguard stand to a coconut tree for the storm but sadly it wasn't worth saving once freed.

There's something about this Sunday
It's a most peculiar gray
Strolling down the avenue
That's known as A1A
I was feeling tired, then I got inspired.
And I knew that it wouldn't last long
So all alone I walked back home, sat on my beach
And then I made up this song.

__________________________J. Buffett