All condos in Cocoa Beach and Cape Canaveral with at least one building over two stories must submit their registration to the State by the end of this year, Saturday, December 31. It's very simple and can be done online (link below). Do not miss this first step in compliance with the new legislation passed in July. It is not optional.
Thursday, December 29, 2022
Tuesday, December 20, 2022
Mortgage rates rose at the fastest pace in 28 years this year. In January 2022 the national average rate for a 30 year fixed rate mortgage was 3.22%. It was 7.08% the last week of October but has pulled back to 6.31% in last week's survey. A 30 year mortgage at today's rate has a payment that is 43% higher than it was a year ago. A $300,000 mortgage with payments of $1300 that was available in January would be $1858 at today's rate. Add higher taxes, insurance and condo fees, and it begins to affect demand.
Speaking of condo fees, we've seen a wave of condo associations in our area forced to make substantial increases in fees to cover increasing insurance premiums and higher expenses across the board. That trend is still in the first inning. All associations with buildings over two stories in our two cities will have to begin funding the newly mandated structural reserve fund over the next two years after they've performed their inspections and structural reserve studies. The insurance premium inflation that is likely to continue plus that new reserve funding is going to hit hard in many complexes and will force further increases in monthly fees. I expect demand for condos to chill as the higher fees become reality. I also expect today's prices to retreat in response to the lower demand and higher costs. There has not been a lot of discussion about this unpleasant new reality but it is here and must be addressed by the end of 2024. Based on many years dealing with many condo associations I expect a good number of them to ignore this for as long as possible.
Anyone reading this with a unit in an older building would be well-advised to start thinking about possible inspection findings in their buildings and how that is going to affect them and the value of their unit. Associations can no longer wait until project time to levy a high special assessment to pay for concrete repairs. The new law requires that ongoing contributions to the structural reserve be sufficient to pay for the project at the time it needs to be done. The sooner the engineer says the concrete project needs be done, the higher the increases to fees need to be.
Sellers of affected condo units (every condo in CB and CC over two stories) will be required to share the structural inspection results with potential buyers or disclose that it hasn't been done yet. As of right now, no disclosure is required but potential buyers need to be aware that today's condo fees whatever they may be are likely going up even in buildings in perfect condition.
What will our local real estate market look like in 2023? My expectation based on everything I've already mentioned is that demand for condos will continue to cool and prices will begin retracting as the fallout from the new inspection/reserves requirements becomes apparent. This might not happen until the second half of the year if most associations procrastinate on their inspections as I expect them to. Single family homes will continue to be in short supply and I don't think their prices will be as affected as condos although they have their own headwinds in the form of increasing insurance costs and higher mortgage rates. I think 2022 will mark the peak for prices during this cycle. I believe the high selling price for units in some buildings has already happened.
As always, I could be so far off the mark that I'm shamed into buying all readers a drink in consolation. Offer stands and these predictions will be evaluated next December. Feel free to make your own anonymous predictions in the comments.
Happy Hanukkah, Merry Christmas and Happy New Year, y'all.
“I did not consider, even passingly, that I had a choice when it came to surfing. My enchantment would take me where it would.” __William Finnegan
Sunday, November 27, 2022
Deciding on an asking price was fairly simple for the first half of 2022. A seller and their agent could estimate fair market value and add 10 to 20% on top of that and expect multiple offers as soon as the listing hit. That has changed. When the slowdown began in the summer many listings were sitting with optimistic asking prices and didn't notice when contract activity tapered off. Listing agents who were paying attention began tempering sellers' expectations and the ones that adjusted asking prices to the new slowed market were the ones who successfully picked off buyers from the shrinking pool of hopeful purchasers.
With the crazy high rents for next year's snowbird season it's probably reasonable to expect many still unsold condos to pull their listing until after March and rent for the season. The sellers that do this are gambling that their asking prices will be more attractive to buyers late next spring and summer than they are now. What are the chances? Perhaps the stock market will have recovered and cash buyers will be comfortable again with cashing out investments to buy a beach getaway. Perhaps mortgage rates will not be higher than they are now. Perhaps those whose employment was curtailed will have landed in a better position and resume their search for a Florida property. All three of those things have affected the number of prospective buyers of Cocoa Beach properties. Our market is directly tied to these and other macro conditions that we have no control over so, as always, deciding whether to sell or wait is at best an educated guess.
A suggestion for the handful of sellers who intend to rent to snowbirds while continuing to try to sell their unit: Please let your renters know before they arrive that you will be having agents and their clients coming by to see the unit during their vacation. Best is to arrange a certain day and/or time period for showings so they don't always have to be on call and ready for a visit by strangers. I run into a few pissed-off snowbirds every season who were never told about this in advance and who are rightfully put-out by the inconvenience and who sometimes express their anger by making showings unpleasant. Not optimal for selling.
Deadline Approaching - Condo Board Members Do Not Ignore
The deadline for registration for condos that was mandated in new legislation this summer is approaching. All affected condos (every condo in Cocoa Beach & Cape Canaveral over two stories) must register with the State by December 31 which is just 34 days away. The association then has two years before they must have completed both their milestone inspection and their structural reserve study. The structural reserve study can't be completed without the results of the inspection so associations need to be making arrangements for their inspections soon. The first inspection may trigger a secondary inspection so it would be prudent to build in some wiggle room with scheduling. Structural engineers who will be doing these inspections are going to be very busy the closer we get to the Dec. 31, 2024 deadline. Associations who wait too long to schedule their inspection might find themselves tardy with the reserve study because of it. I would expect it to take several months to schedule and complete the inspections and reserve study. A nice little incentive for condo Board members built into the legislation is that it is a "direct breach of fiduciary duty liability for failure to comply" with this law. Follow this link for the simple registration process. Deadline Dec. 31 this year.
“The sheep will spend its entire life fearing the wolf, only to be eaten by the shepherd.” _unknown
Wednesday, November 16, 2022
Wednesday, October 19, 2022
There were sixty closed sales of condos and townhomes in our two cities in the month of September. Prices ranged from $1,585,000 for a remodeled 22 year old oceanfront corner 3/3 at Solana Shores to $129,400 for a 64 year old, 338 square foot 1/1 a block from the ocean in south Cocoa Beach. Median selling price for condos was $385,000 with a median dollar per square foot of $333. Three years ago only the nicest, remodeled direct ocean units with garages were bringing over $300/sf. In September there were 17 sales of condos for more than $400/sf.
There were 14 closed sales of single family homes in September. Prices ranged from $2 MM for an oceanfront Cocoa Beach home on a double lot to $415,00 for a small, fixer-upper in north Cocoa Beach probably destined to join the swelling ranks of AirBnB properties locally. If the conversion of single family homes to vacation rentals continues much longer Cocoa Beach schools are going to be without a source of students. This is a growing problem without an obvious solution. Municipalities in Florida are prohibited from banning vacation rentals. The City of Cocoa Beach has been discussing strategies for dealing with the issue but there doesn't seen to be an easy fix.
I have recently heard a couple of stories of new homeowners being surprised that their property tax bill was significantly higher than the previous owner's. They had expected, because the seller was homesteaded at a low rate, that they could homestead and continue to enjoy that artificially low rate. That's not how it works. Once a homesteaded property is sold, the taxable value is increased to current levels and taxed accordingly. When the new homeowner homesteads that property they get a reduction in taxes from that new, higher level and, more importantly, a cap on the annual increase in taxable value. Do not expect to pay the same low property taxes as the long-time, homesteaded seller even if homesteaded again post sale.
"It's hard to accept the truth when the lies were exactly what you wanted to hear." _unknown
Saturday, September 24, 2022
Anyone who has a closing on a Florida property next week is probably going to be delayed unless they can close with no insurance. Citizens and most other Florida property insurers will not bind a new policy when a named storm is within "the box" which is approximately the entire area shown above or when we have a tropical storm watch or warning. The box is simply a huge area of the map in which no named storm can exist at the time of binding a new policy. As of this morning, we have a storm, Ian, in the central Caribbean and as of this writing is just south of the box but will be in it momentarily. The map displayed is not exact but a close approximation of the "box". Any Florida closing scheduled for next week that involves a new policy for property insurance is likely not going to happen even if the storm is hitting Louisiana and not directly impacting or threatening us. Make plans accordingly.
"Why take by force what the gullible and guileless will volunteer?" _Sal Bayat
Saturday, September 03, 2022
In the month of August 63 MLS-listed condo and townhome units closed with a median selling price of just over $400,000. Over half of the sold units commanded over $300 per square foot. A couple of years ago only the very nicest direct ocean units were selling for more than $300/sf. In August ten units in buildings not even on the ocean and without garages closed for more than $300/sf. Over half of the condo sales were cash deals and weekly rental units were still closing at the top of the $/sf range. Twenty five units sold in seven days or less with six of them selling before hitting the market. Highest price sale of the month was $1,200,000 for a 4th floor, 15 year old 3/2 beauty at The Meridian in north Cocoa Beach. Lowest price was $165,000 for a clean little, 56 year old, 2nd floor 1/1 in Cape Canaveral a couple of blocks from the ocean.
There were 15 single family homes closed in Cocoa Beach in August and two in Cape Canaveral. Five of the sold houses closed at prices above one million. The starting price for a fixer-upper, non-waterfront house is now about $500,000 thanks to AirBnB mania. The idea of making big money renting to vacationers is fueling demand for the 50+ year old houses close to the beach and is causing problems in our once-peaceful neighborhoods. The City of Cocoa Beach has been discussing new fees and penalties for noise complaints from the growing number of single family vacation rentals. They are a little tardy on taking action but the measures they are discussing will hopefully help preserve the family nature of our neighborhoods.
Hopefully we'll get to see the Artemis mission fly today after many delays and issues with the vehicle. Labor Day weekend is traditionally one of the busiest weekends of the year here but today will probably break all previous records with hundreds of thousands of people coming to see the launch added to the NKF surf contest crowd and passengers coming and going from four cruise ships in port. Yours truly will be hunkered down for the duration. Enjoy the beautiful weather and expect mind-numbing traffic.
"Consider the example of the monkey -- who, the higher he climbs, the more he shows his behind." _St. Bonaventure, the 13th-century Franciscan philosopher speaking about power and wealth
Sunday, August 14, 2022
Condo owners take notice. The first deadline required by the new Florida condo legislation is less than five months away on Jan. 1, 2023. Condo associations with buildings of three stories or more must file a report with the State by the end of this year. This new mandatory report is simple and can be done online. The registration form can be found here. The required information on the form is listed below.
718.501(3)(a), F.S./Senate Bill SB4D requires all condominium and cooperative associations with buildings 3 stories or higher to report the following information to the Division of Florida Condominium, Timeshares and Mobile Homes on or before January 1, 2023.
- The number of buildings on the condominium property that are three (3) stories or higher in height.
- The total number of units in all such buildings
- The addresses of all such buildings.
- The counties in which all such buildings are located.
Sunday, July 24, 2022
Residential inventory is exploding in Cocoa Beach and Cape Canaveral. The number of existing condos for sale is up 50% since mid-May while the number of single-family homes on offer has more than doubled during the same period. As recently as April there were only 43 condo units and 12 single family homes for sale. The numbers this morning are 101 MLS-listed, existing condo units and 27 single family homes.
Thirty units have closed in the two cities since July 1 at prices between $2 MM and $125,000. Another 46 have accepted an offer since the month began. I would expect the inventory to continue growing as sales activity typically begins to slow as we approach the start of the new school year. Sellers are still pricing optimistically but I am seeing more price reductions as some of them respond to the reality check of an apathetic market. Over 40% of the existing listings have reduced their original asking price. Just a few months ago most new listings were enjoying multiple offers with many selling over asking price. Of the thirty closed units so far this month nineteen of the thirty sold for less than asking price. Sellers, take note; the market is different than it was two months ago and the new reality is more competition, fewer buyers and tighter conditions for condo loans. With the busy months of hurricane season fast approaching, the time to play chicken with the market is behind us. Anyone hoping to sell a residential property here would be well-advised to accept the market changes and make a plan to sell that works with the new reality. The strategy that worked well earlier this year when there was less inventory, lower interest rates and a less-stringent condo mortgage questionnaire is not the best plan moving forward.
Buyers, enjoy your new status in the buy and sell dynamic. Those planning to get a mortgage need to understand what will make a condo complex fail the new mortgage condo questionnaire before they offer on a unit. If the complex is older with obvious deferred maintenance or it is primarily vacation rental units, a mortgage may be impossible. An experienced buyer's agent will have a good idea which ones those are.
"Bad artists always admire each other's work..."--Oscar Wilde
Sunday, July 17, 2022
Condominium buildings 3 or more stories will now be required to have a “Milestone Inspection” within 30 years from date of occupancy, or, if the building is within 3 miles of the coastline (this covers all of Cocoa Beach), the inspection must occur within 25 years, and afterwards every 10 years. Existing condominiums built before July 1, 1992, will need to complete the initial milestone inspection by December 31, 2024
Phase 1 inspection requires the architect or engineer to perform a visual inspection of the properly and make an assessment of the building’s condition. If the phase 1 inspection reveals no signs of structural deterioration, then a phase 2 inspection is not required. A phase 2 inspection is required if structural deterioration is noted, the phase 2 inspection may require destructive testing.
In addition to the association, the inspector's report must also be delivered to the local building official. The association must distribute a copy of the inspector-prepared summary to each unit owner regardless of the findings or recommendations in the report. Any repairs for structural deterioration must be commenced within 365 days after receiving such report or earlier as required by local authorities.
The required “Structural integrity reserve study” is the fly in the ointment for condo fees. For some well-maintained and newer buildings it will have little effect on fees but for buildings with deferred concrete repairs, the requirement to begin funding reserves immediately (or by December 31, 2024 )for a project in the near term will blow up monthly fees.
Associations have a little breathing room before December 31, 2024 but if they anticipate that the structural integrity report is going to find needed expensive concrete repairs it would be prudent to go ahead and boost fees by an arbitrary amount immediately to get a head start. I would expect some Boards to wait until the last minute to give some owners time to bail before fees go up.
Interesting fact: the concrete used in older buildings is not the same as modern concrete. I have learned that concrete formulations began evolving rapidly in the 80s and continue to do so today. Newer buildings in almost all cases were constructed with better concrete than our older buildings especially those built before the 80s. Another issue to consider when looking to purchase a beach condo. Knowledge is power.
Friday, July 08, 2022
Seven single family homes closed in the month of June at prices between $1,750,000 and $370,000, only one unit for less than $650,000. During the month 58 condos and townhomes closed at prices between $1,217,000 and $128,500 with a median selling price of $330,000.
New contract activity has slowed with only 40 condo units contracted in the last four weeks, over half in the first three weeks on the market. Nine single family homes have found a buyer during the same four week period. One notable statistic has been a shift in activity to lower priced units. Thirty of the 37 units contracted in the period were asking less than the current median asking price of $460,000. That illustrates a pretty wide gap between what's for sale and what's selling. Another shift is the number of buyers using a mortgage to purchase. Historically over half of our condo sales have been for cash. Since June 1, only 40% of condo sales were cash deals. That's surprising considering the rapid increase in mortgage rates this year. We had a welcome pull-back in rates this week with the average 30 yr fixed rate mortgage at 5.672% as of yesterday's survey.
My takeaway and observation is that there is a widening separation between buyers and sellers. Sellers in the higher price range above the median are enjoying less buyer interest except in the case of unique properties. Buyers getting a mortgage are looking at a monthly payment that is about 40% higher today than it would have been last year even after the big pull-back this week. Add in higher prices, condo fees and insurance and the climate for continued appreciation is not favorable. Those who are selling and not getting any activity need to ask themselves if this is a typical pause in a hot market or if something has changed and respond accordingly. What the neighbor got for their property in April may not be a realistic benchmark in a changing market. Buyers may still find themselves in multiple offer scenarios for desirable properties but now have the backstop of increasing inventory and cooling demand. The pressure to pay whatever it takes to win is not as applicable as it was two months ago. Best of luck to those looking to participate. Do your homework, know what's happening now with prices and inventory and adjust your strategy and expectations if the current conditions differ with your earlier expectations.
Told you so - from a post I did in December 2014:
The Cocoa Beach Pier was sold to Westgate Resorts of Orlando who have begun total renovation of the 52 year old landmark. I expect big things and probably a challenge of the height and density limits for a new structure on the parking lot. That will be highly contentious if it happens.
And just reported:
Cocoa Beach commissioners voted 4-1 Thursday to allow Westgate Resorts to build a six-story resort at Cocoa Beach Pier (above the maximum permitted building height of 45 feet) paving the way for the resort and parking garage off Meade Avenue.
Thursday, June 23, 2022
Beginning Jan. 1, 2025, condo associations will be prohibited from waiving the collection of reserve funds for structural maintenance and repairs which is an item that most condos in our area do not already include in their reserve accounts. The measure also calls for a reserve study every ten years.
We won't have the exact language until the final bill has been completed and signed into law by the end of this year. Big questions include the percentage of reserves that will be required and how the amount for structural reserves will be determined. Concrete repairs can vary wildly depending on extent at time of repair and where on a building they exist so estimating future costs might require the use of a crystal ball. Even without structural reserves the difference in full or partial reserves can be hundreds of dollars a month in condo fees. Whatever the final language it's safe to expect that single requirement to increase condo fees substantially.
The ten year period between reserve studies and inspections is already being questioned as not frequent enough to accomplish the intentions. It is a step in the right direction but some professionals suggest inspections and reserve studies every three years as more appropriate in order to maintain realistic reserves. Condo owners in buildings without reserves and that have deferred structural maintenance are about to have a serious reality check on the real cost of oceanfront condo living. A 25 unit building that estimates they will need one million dollars for a concrete project in ten years will need to add $333 per month to each unit's condo fees right now in order to have that million in ten years. Estimating repair costs a decade in advance is guesswork at best as is estimating the extent of the needed repairs ten years out. What is estimated at a million today might turn out to be five million in 2032. Owners of units in older oceanfront buildings should be prepared for meaningful increases in their monthly fees. Inspections, repairs and structural reserves will no longer be optional and they won't be cheap.
The rate of new contracts on condo units in Cocoa Beach and Cape Canaveral has slowed significantly in the last couple of weeks. The rate of accepted contracts so far in June is at about half the rate we enjoyed one month earlier. In addition to sharply higher mortgage rates I imagine the stock market decline may be affecting those cash buyers who would have been selling stocks to fund their condo purchase. Whatever the reason, we are experiencing a slowdown in activity. Whether it persists is anyone's guess.
“Most successful people are just a walking anxiety disorder harnessed for productivity.” __Andrew Wilkinson
Thursday, June 16, 2022
Closed sales of note so far in June include a beautifully remodeled direct ocean 6th floor Constellation 3/2 with ocean and river views and one of the best floor plans in Cocoa Beach. It sold for $935,000 before hitting the market. Twelve of the 27 sold units so far this month sold in the first seven days on the market. Slightly more than half of these sales were cash deals. Twelve of the 27 sold for more than $300 per square foot with the weekly rental units that closed bringing substantial premiums to those in buildings that prohibit short-term rentals which are the vast majority of local condos. Skyrocketing vacation rental rates have pushed the prices of units in the handful of short-term rental buildings to unheard-of levels. Two bedroom oceanfront units with the ability to do vacation rentals have pushed over $600,000.
The condo collapse in Surfside happened one year ago this month and it seemed that there were going to be no impact after the Florida legislature earlier this year chose not to act on the Florida BAR task force recommendations. Absent legislative action, property insurers took steps to protect themselves and are increasing premiums and in some cases cancelling policies on a wide scale.
Coming in from left field, the biggest impact so far has been an addendum to the Fannie Mae condo questionnaire. The condo questionnaire must be completed by a condo association for a prospective purchaser who is buying with a mortgage and the answers must conform to Fannie Mae guidelines if the mortgage is to be approved. In the past the main potentially deal-killing issues were ratio of residents to renters, percentage of past due owners, number of units owned by same entity, reserves, insurance and existence of current litigation. The full review questionnaire since March 2022 is much more probing with pages of questions about building condition, date of last structural inspections, findings of that inspection and plans to correct and fund those findings. A respondent who is lucky enough to have a recent satisfactory inspection is likely to be given pause by questions on page two about the association's "awareness" of any safety or structural issue. This is sure to strike some fear in the poor soul who is asked to complete the questionnaire as is the question about "planned" special assessments. That expands the existing requirement to disclose special assessments from those that have actually been issued to any that are "planned". There are also new questions about date of last reserve study and balance of the reserve account. It's safe to expect some Board members and managers to refuse to complete the new full-review questionnaire.
One bright spot in this (so far) is that the limited review condo questionnaire has only limited changes so buyers in buildings that can't satisfactorily answer the full-review questions can put 30% down and hope to be able to pass the shortened review questions. Note that limited reviews will still contain broad questions about "planned" assessments and deferred maintenance. Owners in older buildings with deferred maintenance would be well-served by pressuring their Board to address structural issues sooner than later. Inability to satisfactorily answer the condo questionnaire will limit a seller to cash offers only, potentially impacting selling prices. However all this plays out, I stand by my prediction that expenses for owners in older Florida condos are going to continue to soar.
Sellers of condos need to know whether or not their association can pass the full (or limited) condo review so they don't waste time accepting a low down payment mortgage offer that is destined to fail. Same goes for owners in the not-few local buildings that can't pass any questionnaire. Those buildings have been relegated to cash deals only for years but I still see the occasional contract go contingent with a mortgage knowing that it will be back on the market soon. This is always an inexperienced or out-of-town agent who isn't familiar with the building. Sellers should ask prospective listing agents what issues buyers seeking a mortgage will be facing in their building so that they can avoid the disappointment of a failed contract. A listing agent who can't answer that should be removed from consideration.
I'd love to hear from readers who've renewed their flood policies since April 1. Have your rates gone up? How much? I expected substantial increases especially for those in flood zones but haven't heard anything in the two months since the changes took effect.
Anyone who'd like to read the new full review condo questionnaire can email me at email@example.com for a copy. I would advise any Board members or owners planning to sell to familiarize themselves with the questionnaires.
"Money is a lot like alcohol. It doesn’t change a person. It amplifies who they are." _anonymous
Sunday, May 15, 2022
This is a sign not to ignore. The sound of a baby alligator bleating is a guarantee that Mama will be on the spot very soon. Please give the nests, baby gators and the shoreline of the ponds a wide berth at the Cocoa Beach Country Club.
Inventory is increasing. There are 81 existing residential properties of all types for sale this morning in Cocoa Beach and Cape Canaveral at prices between $134,900 and $1,999,000 with a median asking price of $499,000. Thirteen of these are single family homes, all of them in Cocoa Beach. There hasn't been a single-family home offered in Cape Canaveral for several weeks.
There are still two luxury units offered in The Surf (under construction) downtown Cocoa Beach for $1.66MM and $1.999MM. Other listings of note are a remodeled 47 year old, 10th floor NE corner 2/2 at 2100 Towers asking a staggering $1,497,000. How about a 3rd floor 3/2 with 1323 square feet and no garage at Cocoa Beach Towers asking $950,000. Weekly rentals allowed here so that takes a small step towards justifying that number.
Twenty two residential listings have closed so far in May, including a yet-to-be-finished single family in a new riverfront development in south Cocoa Beach for $2,095,000. Not sure how they manage to close the sale of houses that have yet to be finished. Maybe someone can enlighten me. Over half of the closed sales sold for full asking price or more, one at $65,000 over asking price and over half sold within the first seven days on the market. And, over half of the closed sales sold for cash.
Other closed sales of note included a small furnished 1st floor Canaveral Towers 2/2 with no garage and no ocean view that sold for $595,000. Weekly rentals boosted that number as they did for a 49 year old, 2nd floor, side ocean view Spanish Main 2/2 that sold for $549,500. It was remodeled and furnished but had no garage. A nicely remodeled & furnished 3rd floor direct ocean 2/2 at Hacienda del Mar in south Cocoa Beach closed for $594,000. It has a wide open ocean view and a garage but the building doesn't allow weekly rentals.
Sales continue to be strong with 32 contracts accepted since May 1 including a penthouse at the unfinished Surf downtown Cocoa Beach that was listed for $3.2MM.
The national thirty year fixed rate mortgage average is 5.57% as reported today by Bankrate.com. That's two full percentage points higher than the rate we began the year with. This is certainly affecting some buyers but with a high percentage of cash sales and second home sales, the effect on our local market is not as drastic as it may be in non-vacation-destination markets.
Those looking to buy in our market will be well-served to remember that there is intense competition and many prices can't be justified by the last sale of a comparable property. The sales are going to the bold and quick buyers. The time to do one's homework as a buyer is before the search begins, not after a property has been found. While you're studying comps some other buyer is likely already writing a non-contingent offer. Know what you want and what you're willing to pay to get it. Be realistic. There are no deals in a market like this. Either make peace with that or stop torturing yourself with a search that isn't going to yield fruit. Best of luck to those of you on the hunt.
"If you add up all the federal and you look at the disability and the unemployment and the Social Security and the state, my tax rate's 62, 63 percent. So I've got to make some decisions on what I'm going to do." _Phil Mickelson
Sunday, April 24, 2022
Snowbird season 2022 is behind us and all but a few of our winter guests have returned to their northern homes. Those who have only visited during the Christmas to Easter snowbird season might be shocked at the pace of life post season. Restaurants are no longer jammed, sidewalks are empty and a golfer can show up at the Cocoa Beach Country Club without a tee time and be assured of getting a round in. We'll enjoy a month or so of this before the summer vacation season takes off in earnest on Memorial Day weekend.
Real estate sales are somehow keeping the pace despite depleted inventory and crazy, high prices. We have a total of 55 existing residential properties for sale this morning in Cocoa Beach and Cape Canaveral. Just twelve of those are single family homes. In the last two weeks, 57 sellers accepted an offer, most of them choosing from multiple offers. That works out to a 16 day supply at the current rate. That would seem unsustainable except for the fact that we've been maintaining this precarious pace for a few years. Ever-higher prices are reflecting the skewed demand/supply dynamic.
Of the 75 properties that closed since first of April, 31 of them closed for more than asking price, several for considerably more. Weekly rental oceanfront condo units continue to set records. Among those that raised my eyebrow was a 4th floor furnished 2/2 at Canaveral Towers that closed for $696,000, which was $46,100 over asking. This seems crazy for a 47 year old unit without a garage but the magic comes from the ability to do weekly rentals at Canaveral Towers. The current sky-high weekly rental rates for nice oceanfront units helps the math pencil out even at these astronomical selling prices. Another weekly rental 2/2 next door at Cape Winds closed for $530,000 with a side ocean view and no garage. A north facing Sandcastles 2/2 weekly sold for $575,000, $46,000 over asking while a direct ocean Sandcastles 2/2 brought $645,000.
The weekly rental condos weren't the only ones setting records. A Windjammer direct ocean 2/2 sold for $532,000, $7500 over ask while a 59 year old Diplomat 2/1 with no view or garage sold for $300,000. Single family homes are likewise setting new records with selling prices. There is only one single family home in our two cities asking less than $550,000.
One disturbing trend I have recently noticed is incorrect square footage of condo listings. Two of the sold listings I mentioned above had inflated square footage in the MLS listings and there was a new one this morning that overstated the size by 14%. This is deliberate on the part of the listing agent and I can think of no reason other than to deceive potential buyers. Perhaps the sellers are convincing the listing agents that the tax record is incorrect and the agents go along with it rather than lose the listing. Whatever. Be careful out there and don't trust everything stated in a listing. It's easy to confirm the size with the tax record.
“If something looks irrational – and has been so for a long time – odds are you have a wrong definition of rationality.” __Nassim Taleb
Friday, March 25, 2022
Anyone hoping for more residential inventory in Cocoa Beach or Cape Canaveral is advised not to hold their breath. Numbers have declined again after a brief spurt of increased supply last month. There are a total of 50 residential properties of all types listed for sale on our MLS this morning. There are another nine proposed properties looking for reservations. In the last thirty days 79 properties have closed. At that same rate, our 50 currently available properties will be gone in 19 days. I believe that may be the lowest our supply has ever been although I don't track that particular metric.
Of the 79 sold properties, over half sold for at least full asking price.
- 27 sold for more than asking price.
- 45 sold for cash.
- 11 sold first day on market.
- 48 sold in seven days or less.
With the high level of competition buyers have become creative and, in some cases, careless with offers. Some of the strategies I've seen are waiving inspections, waiving appraisal or agreeing to make up all or part of the difference in the event of a low appraisal, escalation clauses, fast closings, rent-backs to sellers and in one bizarre instance, discussion of a bribe.
Buyers looking for a single family home in Cocoa Beach have ten existing houses to choose from, none of them asking under a half million. There is only one single family listing in Cape Canaveral, a 69 year old 3/2 on almost two acres of beautiful Banana River frontage asking $1,650,000.
Advice for Prospective Buyers
I would advise all prospective buyers to deal with the reality that you will almost certainly be competing with other buyers and to have a strategy in mind before you make an offer. Do not expect to find a deal. They do not exist. Do not withdraw an offer because you suspect the listing agent is lying about multiple offers. Do not think you'll be able to whittle the price down after inspections. There are buyers standing by who will be more than willing to take your place without a credit for repairs. Speaking of taking your place; if you lose out in a multiple offer scenario, write a backup offer and get it signed by the seller if they're accepting backups. I'm seeing many failed contracts presumably because sellers are refusing concessions post inspection and others because of low appraisals. It's tough to be a buyer now but somehow, 79 determined buyers closed on what they were looking for in the last 30 days.
I noticed while researching these numbers that there are seven condo listings with missing condo names. An agent or consumer who searches for a unit by condo name in one of those seven buildings will not find those listing. Prospective buyers whose agent set up an auto-alert in the MLS for a unit in one of those buildings will not get a notice of those listings. In this market, they will sell anyway but may not bring what they might have if all interested buyers were included. I'd advise sellers to review their listings carefully as soon as they come active looking for errors or omissions. Our non-intuitive MLS listing entry process makes for easy omissions so even experienced agents can miss something but those that care will catch it in their last review before taking the listing live. There is zero excuse for a missing condo name on an active listing.
The new luxury condo, The Surf, in downtown Cocoa Beach has topped out. There is one last unsold unit being offered for $1,999,000. The long-delayed development of million dollar single family homes on the riverfront site of the old Joyce's Trailer Park in south Cocoa Beach is finally in high gear. I will be interested to see if the developer makes good on his promise of restoring and opening the clubhouse over the river in the old Fisherman's Wharf restaurant building. It was promised to buyers of units in the developer's other condos in south Cocoa Beach in addition to the buyers of the new houses. Some of those condo buyers have been waiting for their clubhouse for over five years.
"The early advocates of universal literacy and a free press...did not foresee...the development of a mass communications industry, concerned in the main neither with the true nor the false, but with the unreal...In a word, they failed to take into account man's almost infinite appetite for distractions." __Aldous Huxley, Brave New World Revisited (1958)
Sunday, March 13, 2022
Despite the task force's recommendations, one member demanded that the bill include a requirement for associations to fund reserves. He would not compromise and as a result, the bill failed to pass. As it stands now, Florida condo associations can fund reserves completely, partially or not at all. Those with partial or no reserves must levy special assessments when funds are needed for repairs. The resistance to a large special assessment is what led to the delay and subsequent collapse of the Surfside building.
Most associations fund reserves for big ticket items like the roof, pool, parking lot and painting. Until now, concrete repairs have rarely been specifically included as an item in condo reserves. If associations were required to fully fund reserves and include concrete repair in them it is conceivable that some associations would have to raise their monthly fees into the thousands of dollars per unit. It is a tough situation and whether law or not, condo boards are still faced with the challenge of maintaining their buildings and raising the money necessary from owners. There is always resistance to assessments or increased fees and as a result expensive repairs are often pushed off into the future. There are buildings in our area that have serious concrete issues that should have been taken care of long ago. Anyone hoping to buy a condo unit on the ocean should pay close attention to the appearance and integrity of the buildings they're interested in and to also examine the financials to determine the ability of the association to fund repairs. Low monthly fees for an oceanfront building, while attractive, are a red light for prospective buyers. Do your homework. Whatever the monthly fee is today, it is going up.
''Most of us did not think these kinds of things could happen in our country. The veneer of civilization is very thin." __Margaret Thatcher
Sunday, March 06, 2022
In a post from this same weekend in 2018, I commented that pricing was getting ahead of itself with 44 units asking over $300 per square foot while only three condos had closed so far that year in that range. Jump to March 2022 and, as of this morning, 46 units have closed for more than $300/sq ft, with eighteen of those fetching over $400/sf. Sales of units commanding top dollar are no longer restricted to a specific property type and/or condition but are spread across multiple complexes with $400+/sf sales happening at Ocean Oaks, Stonewood, Xanadu, Canaveral Towers, Las Palmas, 2100 Towers, Park Place, Royal Mansion, Spanish Main, Royale Towers, Ocean Pines, Sandcastles and Riomar among others. Not all of these oceanfront units had garages.
MLS inventory of existing condo units in Cocoa Beach and Cape Canaveral the last few weeks has bounced around between 35 and 45 units while single-family home inventory has stayed between 13 and 19 for sale at any moment. Since Feb. 1 a total of 76 condo units have closed along with 13 single-family homes. Thirty of those closed sales since Feb. 1 were at least $500,000 with five of those over a million dollars.
Most fairly priced new listings are getting multiple offers quickly and buyers are getting aggressive with their numbers and terms. It's not uncommon to see inspections and appraisals waived and many buyers are offering on properties sight-unseen. With so much competition, sellers are becoming more discerning with the offers they will entertain. They are wisely expressing concern with offers well above asking if they don't waive appraisal. Likewise, sign-unseen offers may be perceived as too risky. Buyers need to discuss all angles with their agent to figure out how to craft an offer than can compete. The less uncertainty an offer carries, the more well-received it will be. Expect the others to be offering cash with no contingencies and be prepared to lose to a crazy high offer. One last thought about multiple offers; a buyer who loses a unit to a higher offer will now be using that selling price as the new comp when they make their next offer. It's become a pay now or pay later dynamic.
Best of luck to buyers who are in the hunt. Be smart and quick with your offers and have an agent who knows the market and understands the competitive environment. Every edge matters and having a slow agent who doesn't understand our market dynamics or how to write a competitive offer will hurt you. Keep the offers as clean as possible, be prepared to pay more than you think it's worth (right now) and don't be slow to make an offer on a good property.
"Ever thine. Ever mine. Ever ours." __Ludwig van Beethoven
Sunday, February 20, 2022
Property sales in Cocoa Beach and Cape Canaveral continue at a furious pace even as inventory hovers at just less than a month's supply. After declining steadily for sixteen years we seem to have settled into a precarious just-in-time balance between sales and new listings. There have been 115 new condo listings since Jan. 1. Eighty of those new listings have already found a buyer. During the same seven week period 104 condo units have closed, eleven of those in the unexplored range over $400/sq ft. There are currently 47 existing units offered for sale with another four proposed units available for reservation. Of the units currently offered for sale only half have been for sale longer than three weeks. I wonder why the units that have been on market for over 30 days have not sold yet. Could it be price?
There are a total of thirteen existing single family homes for sale in our two cities. Thirteen homes have closed since start of the year only four of which were under $500,000. The lowest priced current listing is $499,900.
As in previous years, over half of this year's condo sales so far have been for cash. Mortgage-seeking buyers are adapting in order to compete by dropping contingencies. I have rarely written offers in the past waiving inspections or appraisal but that has become normal. If the time period will allow for it, a buyer can offer cash and still get a mortgage in time for closing. In that scenario, the buyer better have a local lender who understands condo loans and can perform with a tight time period. If the lender isn't ready by close date, it's either close with cash or lose the deposit. I would not recommend offering cash intending to get a mortgage with an out-of-town lender nor if I didn't have the liquid cash to close with. Prudent listing agents are asking for increased deposits with cash offers to ensure commitment and to penalize failure. Buyers, prepare your offers accordingly and know that contingencies of any kind weaken your offer and open the door to a competing buyer who offers without contingencies. Good luck and be prepared to move quickly and decisively.
"I know worrying works, because none of the stuff I worried about ever happened." ___Will Rogers
Friday, January 28, 2022
After trending up for a few months the inventory of residential properties for sale in Cocoa Beach and Cape Canaveral is shrinking again. There are only 60 individual residential properties for sale this morning in our two cities, 47 condos and townhomes and 13 single family homes. In addition, there are another seven unbuilt luxury homes offered by reservation in the much-delayed planned community on the river in south Cocoa Beach.
Activity has been non-stop with 68 condos receiving an accepted contract since the beginning of the year. If the sales rate continues at this pace, the entire existing inventory of condos will have sold by Valentine's Day. Resistance to crazy high prices has all but evaporated and frustrated buyers have been paying prices that can't be justified by earlier sales. In the last two months seven oceanfront condos have sold for more than $400 a square foot, four of them without a garage. These prices put us in unexplored territory. Can prices continue to go up? Sure. Can they reverse course? Same answer. Buyers looking for return on investment can easily calculate whether current prices work with expected rents and occupancy. Those looking for a beach get-away for their family or for a primary residence should be more concerned with the property itself than with where prices are at the moment. I've watched careful buyers wait years because they thought prices were too high and would be correcting. For the last fifteen years or so those buyers either had to reframe their expectations or they never bought. Waiting for a correction that is slow in coming might mean not making memories at the beach during years when it would mean the most. Everyone has to decide for themselves. Paying 10% more than one thinks a unit is worth today will probably be inconsequential years down the road, especially if those years have been spent enjoying the family beach place that Mom and Dad overpaid for. Bob Marley may have been talking about this when he sang, "'summer is here, I'm still waiting there."
"Let me be clear about this. I don't have a drug problem. I have a police problem." __Keith Richards
Monday, January 03, 2022
Another year done and one in which we were still dealing with a disrupted economy. Despite the pandemic and related issues in the economy, 2021 was a multiple record setting year for Cocoa Beach and Cape Canaveral real estate. The number of residential properties sold in our two cities was the highest in history. Our average inventory was the lowest of all time and selling prices for many properties (not all) were at the highest levels ever.
Two years ago, January 2020, we began the year with 108 condos and townhomes and 21 single family homes for sale in the two cities. Inventory during 2021 averaged a little over half that in both property types. Despite the drastically low inventory we closed the most units ever, 863 condo and townhome units and 168 single-family homes. There are currently 14 single family homes and 57 condos for sale in the two cities. Anyone looking for a single-family home in Cocoa Beach for less than $625,000 has only one listing to consider. A buyer looking for an oceanfront weekly rental condo unit is completely out of luck with zero units offered on the MLS this January morning.
Vacation rentals were one of the story property types of 2021 when we saw an explosion of vacation rentals in buildings off the beach. That was fueled in part by the City of Cocoa Beach relaxing its opposition and enforcement of vacation rentals in previously prohibited off-the-beach areas. Prices being paid for those properties and for the few condos that allow weekly rentals skyrocketed.
Vacation rentals weren't the only property type to see record high selling prices. Sellers of oceanfront units happily accepted over $300 per square foot for 43 different units during the year compared to just six the previous year and zero in 2019. That upward movement in prices continues with little resistance. Those hoping to purchase this year need to understand the dynamics at play and construct their offers accordingly. There will be competition for any desirable property and it is likely to include buyers who are willing to knowingly overpay. Buyers paid over asking price for 155 condos in 2021 and the majority of the remainder sold at or within 2% of asking price. Slightly more than half of all sales during the year were cash deals. Cash buyers always have an advantage over a buyer using a mortgage but that advantage has increased clout with these market conditions. With the current optimistic pricing, appraisals become an issue and the uncertainty that comes with that becomes a liability for a mortgage-seeking buyer. It is not uncommon for a seller to accept a lower cash offer over a mortgaged offer for just that reason. Don't lose that dream condo over a few thousand dollars if it's checking all the boxes. Pinch your nose, pay up, and enjoy the beach while market momentum closes the price gap after closing.
Welcome to all our new neighbors who bought in 2021. I hope Cocoa Beach turns out to be exactly the laid-back, friendly little beach town you were looking for.
"Wow. That's my husband. It's freaking Nazaré and I'm pretty sure he has a soft top with him." __Jordan Gravy