Saturday, February 04, 2023

Optimism vs Reality

There were 33 condos and townhouse that closed in the month of January 2023 in Cocoa Beach and Cape Canaveral. Highest price paid was $760,000 for a 16 year old 3rd floor corner in south Cocoa Beach at Garden by the Sea. It was direct open Banana River and had 2405 square feet with two garage units. At the other end of the scale were eight much older, smaller units that closed below $200,000, all but one of them in Cape Canaveral. 

I don't remember ever having a month in which there were no direct ocean, east-facing units sold. Direct ocean units are the bread and butter of our market and it's surprising to see them missing from the sold list. Highest price per square foot paid were two small units with peeks of the ocean in oceanfront buildings that allow weekly rentals, Royal Mansion and Cape Winds. Both units sold furnished and brought over $500 per sq.ft. Meanwhile, seven of the remaining twelve weekly rental units currently on the market have been for sale for more than 100 days without selling. Only two of them have lowered their price during that time in response to the market's indifference. There is a shared reason for their stubborn optimism.

That reason is the handful of jaw-dropping, high selling prices last year among the weekly rental buildings. Every one of those high sales was a unit with a strong rental history and a stream of future bookings already in place. The new owners closed and assumed the income stream if they stayed with the same management. The stubbornly optimistic weekly units languishing on the market are shooting for similar prices but they lack the rental histories to justify their asking prices. While any comparable unit with similar views and amenities has the same potential for income, buyers are resistant to high asking prices without a solid track record. A unit with $40,000 of rental income last year shouldn't expect to command the same selling price as a similar unit that brought in $100,000. We have not seen this disparity among selling prices of non-rental units in other buildings.

Inventory has increased to 143 units for sale in our two cities. The highest four asking prices per square foot are in weekly rental buildings, all asking over $600 per sq,ft, but only one with a rental history that would justify the price. There are 45 other units asking over $400 per square foot only a few of which I would consider fairly priced at their asking price. Cash sales represented 79% of January's sales. Those who are currently looking to purchase in our market may have a little more leverage than they had last year, at least with the older listings that are over-priced. Note that there are still quite a few sellers who are expecting to get what their neighbor sold their unit for last year even though those prices may not be realistic in February 2023.

Downtown Cocoa Beach has transformed over the last few years with a new fire station, new police station, parking garage and now demolition of City Hall. Around the corner the luxury condos at The Surf on the ocean are approaching completion while next door and across the street existing buildings have been demolished to make way for new structures. There is a new building well underway on the site of the old Barrier Jacks and demolition on the International Palms (the old CB Holiday Inn) has begun. It's a time of change for our little beach town. Oh yeah, the snowbirds are here with all that entails. Welcome back and enjoy.

"When you’re accustomed to privilege, equality feels like oppression."