Thursday, October 05, 2023

Triple Whammy

Condo fees in our area are going up, dramatically so for some complexes. Quite a few associations are facing an unpleasant trifecta of increasing insurance costs, increasing costs of maintenance and the new structural reserve requirements. spells out the triple whammy of increasing costs for condo owners. Realistically there is a fourth whammy. In addition to repairs, insurance and reserves, inflation has proven to be an unwelcome surprise. Associations contracting for concrete restoration now are finding out that the costs for concrete projects have ballooned in a few years. The backlog of condos contracting for major restoration projects is growing as everyone scrambles to meet the December 31, 2024 deadline. The concrete restoration companies have more work than they can get to and pricing naturally reflects that. As we approach the deadline at the end of 2025 this will only become more pronounced. The median monthly condo fee of the units for sale right now is slightly over $550 and certain to be higher by end of next year by which time all complexes will have done their inspections and begun funding the new structural reserves.

Anyone looking to purchase a condo in Florida should be prepared for fee increases next year unless the association has already renewed their master policy and established and begun funding the structural reserves. Prospective buyers should be requesting a copy of the milestone inspection report and reviewing the association financials carefully. The majority of local condos have not completed their inspection and subsequent reserve study so in those complexes a prudent buyer should factor in a not-small fee increase once those are completed. All other things being equal, a condo unit with $550 a month fees is worth more than an identical unit with $800 fees unless that $550 a month unit is about to jump to $800. Hint: many of those units at $550 now will be much closer to $1000 by the end of next year. Offer accordingly.

Our condo inventory has continued to creep upwards with 195 condo and townhouse units for sale today in Cocoa Beach and Cape Canaveral. A third of those have been on the market for 90 days or longer. Only 36 units have gotten an accepted contract since September 1. Of the 51 units closed since first of September, slightly over half were cash deals. Half of the 51 sold units sold within 30 days of listing. With increasing supply and dwindling buyer interest anyone trying to sell a condo needs to realistically evaluate the competition. A seller with a unit that has been on the market for longer than a month should be asking themselves why one of the 36 buyers that found a unit since September 1 didn't offer on theirs. One question for those sellers: If you haven't gotten an offer at your current price how much of a price reduction do you think will be be necessary to entice a buyer next year once fees have gone up?

I may be entirely wrong about rapidly ascending condo fees but the evidence suggests otherwise. Maybe insurance will become cheaper. Maybe the legislature will eliminate or modify the reserves legislation. Maybe.

I don't know how much rain we got this week so far but I'd guess close to a foot. Add in Canadian smoke in the air and it's been a strange beginning for an October. Cheers.

"Any regulatory framework emerging from closed door meetings will benefit those in closed door meetings." _Denver Riggleman

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