Sunday, September 26, 2021

Setting Records and Taking Names

Real estate sales in 2021 in Cocoa Beach and Cape Canaveral are already in record territory and by the time the year is finished we look to have recorded the highest annual residential sales in history, eclipsing even the bubble years of 2004 and 2005. Here is a look at sales of all years, since I began keeping records in 2004, as they stood through the month of August.

The month of March 2021 set a new all-time monthly record for condo sales in our two cities with 103 units closed. That record was broken immediately in April when 113 units closed. That we've done this with the lowest inventory in history is nothing short of incredible. For context, condo inventory in 2004 and 2005 was hovering between 700 and 1000 units for sale. On January 1, 2021 inventory in our two cities was at 113 existing units for sale and dipped as low as 35 units for sale a few months later. We've closed more units most months this year than the average number for sale during the month.

Prices, likewise, have been record-setting. Here is an excerpt from one of my posts in 2015:

Prices paid for the 80 direct units that sold in 2015 ranged from $187 to $362 per square foot (if dropping the highest and the lowest). Pricing by the square foot is inexact but it's usually the best starting point in an exercise of estimating value. The median was $250/sf with only three units selling for more than $300 per square foot. Those properties that sold for more than $250 per square foot were generally newer or nicely remodeled and/or furnished. 

By comparison, in 2021 we have closed 95 direct ocean units so far at prices between $228 and $519 per square foot (dropping the high and the low). The median was $339/sf with 71 of the 95 selling for over $300 per square foot and 18 of those over $400/sf. Prices have been in uncharted territory for all of this year and are still climbing. Buyer appetite is still strong although we are going through typical fall slowdown in activity right now. Sellers are playing hardball and buyers are competing with one another for good properties. Multiple offers are to be expected on any desirable property. Knowing that some buyers are willing to knowingly overpay in a rising market will be beneficial knowledge for buyers who find themselves in multiple offer situations. Buyers and sellers need to remember that their estimate of value, no matter how they arrived at it, is an estimate. The opposing party will almost always have a different estimate. Sales happen only when the two parties can reach an agreement or compromise on that estimate. 

Speaking of multiple offers, a Sarasota listing agent is in hot water after being accused of presenting multiple offers in a biased manner to favor a buyer who also happened to be his customer, a fear every buyer harbors when notified of multiple offers.

I managed to slip away with a friend and put a few snook in the boat this week with Capt. Travis Tanner. All but two slots were oversize and released unharmed to continue to terrorize the mullet schools streaming through the Port. The snook will be following those schools into the ocean as the annual mullet run heats up and they move southward down the beach. Beach anglers fishing the trough right off the beach with artificials or live mullet in Cocoa Beach and Cape Canaveral will be catching their share of one of the best-eating fish in our waters. Fish must be at least 28" and no more than 32" in total length to be harvested. All others must be released unharmed. Skin your fish if you don't want to ruin the taste. Good luck to all.

“The Party told you to reject the evidence of your eyes and ears. It was their final, most essential command.” __George Orwell 1984

Monday, September 13, 2021

Money in the Bank

French kids enjoying the Thousand Islands in Cocoa Beach. Happy Birthday Alesia and Bianca. 

What's happening with Cocoa Beach real estate and which property types are seeing the most interest? What has been the impact locally, if any, from the Surfside condo collapse and should I avoid older condos altogether? What is the future for Cocoa Beach property prices and property insurance costs? These are some of the questions I have gotten recently.

One hot property type has been vacation rentals. After being a small, relatively unnoticed segment of the local market, demand for vacation rental properties has exploded. There are only about a dozen oceanfront condo complexes in Cocoa Beach and Cape Canaveral that allow weekly rentals and until recently, short-term rentals, with a couple of exceptions, were only allowed in those particular condos plus oceanfront homes and duplexes. The City of Cocoa Beach no longer aggressively restricts short-term rentals and that has blown up demand for non-oceanfront properties with vacation rental potential. As these other properties have entered the vacation rental market, demand has been surprisingly strong from holiday goers. Apparently, for vacationers, an ocean view is not the must-have we thought it was. Long term single-family rental homes in quiet Cocoa Beach neighborhoods are shifting to AirBnB rentals and the character of those neighborhoods is changing. I've heard a few nightmare stories about rotating beach party crowds in once-quiet neighborhoods. The City, so far, has been unresponsive. In the meantime, prices for properties with vacation rental appeal are soaring. At the moment, among all the oceanfront condos that allow weekly rentals, there is only one for sale, a 760 square foot one bedroom with no ocean view asking $299,900.

In south Florida, post-Surfside collapse, high-rise buildings are required to do a structural inspection and recertification by their 40 year birthday. That requirement does not exist here...yet. Many of our older buildings are putting off making needed repairs because of the expense. At least one oceanfront building in Cocoa Beach has been recently flagged by the City as unsafe and occupants of units above the ground floor are prohibited from entering their units. I can think of a few other buildings that could find themselves in the same situation if they don't take care of their issues. I have not heard of any increases in condo master policy insurance yet but I think it's safe to expect rising premiums as policies hit their renewal date. Buyers and owners of units in older oceanfront condos would be well-advised to anticipate increases in condo fees as a result of repairs that can no longer be ignored and more expensive master policies. If higher premiums don't materialize, the repairs still have to happen and be paid for. As always, there is value in buying in a building that has been diligently maintained. I hesitate to speculate what could happen if insurers decide that poorly-maintained older buildings are no longer worth the risk.

Waterfront Cocoa Beach single family homes have been money in the bank for the last ten years. Will that continue to be the case? Extremely short supply and zero land on which to build more supports the positive. The big question is insurance. Will the new flood insurance rates beginning in October affect values? I suspect that even higher insurance will not change the story. The limited supply can't change. There are only nine waterfront Cocoa Beach single family homes for sale today, only one of them asking less than $749,000. Four waterfront homes have accepted an offer since September 1st.

Condo inventory stands at 72 exiting units for sale in Cocoa Beach and Cape Canaveral. Thirty five units have gone under contract since September 1st which means, at the same sales rate, our current inventory will be gone in less than a month. Have questions? I'm happy to try to answer questions about Cocoa Beach real estate. My contacts are at the top of the page. 

Here's an excerpt from an older post that is even more relevant now and those looking to purchase will be better prepared having read it.

Buyers need to keep this low inventory in mind when looking and offering. The more stringent one's must-have list the more crucial it becomes to shoot for success when offering. This is not the time to offer low and work up to fair. If the perfect property becomes available now is the time to be aggressive. Considering the pace of new listings, it could be a long time for another acceptable listing to appear and by that time, prices are likely to have increased. If you hope to buy a property in this market at this point in history, be bold and quick with your offers or be prepared to never buy. I don't like it either but, as I heard a high-ranking figure recently say, it is what it is. Know that if you do have to overpay for your perfect beach getaway, the tight inventory and vigorous demand will likely push the value up to your purchase price and beyond in short order. 

SpaceX is scheduled to launch four non-professional astronauts on a private three day orbital mission on Wednesday night. Two of the astronauts won their trip in contests. Night launches, manned or not, are always spectacular. Don't miss it.

"If memories were all I sang, I'd rather drive a truck." __Rick Nelson