Beware the Market Snapshot

Typical crowded beach in south Cocoa Beach last week

I receive quite a few marketing direct mail and email blasts from real estate agents, mortgage brokers, title companies and such that include market statistics in their sales pitches. Market statistics are provided by most local Realtor associations to their members for use in marketing. They are most commonly presented (in my experience) as a market wide snapshot demonstrating the health and direction of the local market. All good and I imagine this might be meaningful in some concentrated, homogenous markets but in our 72 mile long county with many distinct and separated cities and communities an overall “market snapshot” is worse than meaningless. It’s misleading. The market viewed as a whole may suggest a different reality than the specific market niche one may be selling or hoping to buy in. Those using these stats rarely mention this. It’s marketing after all. The temperature of the Palm Bay single family home market has very little to do with the health of the beachside condo market. In fact, the one and two story, non-waterfront beachside condo market has little in common with the oceanfront condo market just as the Cocoa Beach single-family home market often moves counter to our condo market. Beware the market snapshot.

Condo inventory in Cocoa Beach and Cape Canaveral has increased slightly with 298 total units for sale as of this morning. The median time on market shows as 112 days but that is misleading because of the way that the MLS calculates combined days on market. The listings that gave up on selling last year and rented for a few months hoping for a market improvement can come back on the market now as a brand new listing with zero combined days on market. Same holds true for a listing with a clever listing agent who cancels and relists to get a new MLS number. There are many of both types of these listings in the current inventory making the time on market appear less than it really is.

A total of 37 units have accepted a contract so far in October. The median time on market indicated by the MLS was 131 days but a look at the relisted units among them like those mentioned above reveal the actual time to sell to be much longer.

Reality is starting to set in for many sellers with overly optimistic expectations. Among the 37 units contracted so far in October a few stand out for their extreme price reductions that produced results.

• Oceanfront unit - original asking price $650,000. Asking when buyer found, $499,000.

• Oceanfront unit - original asking price $439,900. Asking when buyer found, $349,000.

• Oceanfront unit - original asking price $1.1 MM. Closed for $880,000.

• Riverfront unit - original asking price $595,000. Asking when buyer found, $410,000.

• Oceanfront unit - original asking price $700,000. Asking when buyer found, $499,900.

• Oceanfront unit - original asking price $549,000. Asking when buyer found, $399,900.

• Riverfront unit - original asking price $364,900. Asking when buyer found, $284,500.

• Oceanfront unit - original asking price $439,900. Asking when buyer found, $349,000.

• Riverfront unit - original asking price $470,000. Closed for $311,000.

And the most extreme of the reality checks this month; a seller of an oceanfront unit who was originally asking $1.3 MM with no luck even after several large price drops over the course of two years decided last year to let the listing expire and rent the unit. They came back on the market this month at an asking price of $599,000 and found a buyer quickly. A reality check of over $700,000 and a cautionary tale for those who may be thinking of pulling their listing to wait for a more favorable market. Are you feeling lucky?

Some of the 37 units sold for or will close for less than the seller paid for the unit. In addition to these I’m also starting to see new listings of units that were purchased in the last three years or so that are back on the market with a starting price of less than the price previously paid. This may have more to do with substantially increased condo fees over the last three years than to overall market sentiment but it’s certainly worth paying attention to as it’s not something we’re used to. Markets don’t correct overnight but they usually give hints. Whether this is a hint or a temporary aberration remains to be seen. I’ll continue to pay attention.

“Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.” ___Warren Buffet

Distant Storms - Fewer Condos

This post first appeared at  larrystake.substack.com on October 1.

As I write this, hurricanes Humberto and Imelda are moving away to the northeast well offshore following the general track of their older siblings this season. Since early August there have been constant, overlapping long-period swells from passing distant storms gracing our shore. That’s made for an active late summer for Brevard surfers without the attendant stress of a possible landfall but not so great for surf fishing during the fall mullet run. The relief of watching an approaching storm start its northward turn away from us is a shared joy for all, surfer or not.

Our residential real estate market is firmly into the slower fall season. The MLS is reporting a total of 27 closed condo and townhouse units and five single family homes in the month of September. As always, that number is likely to increase slightly as tardy listing agents get around to closing their sold listings. Average time on the market for the sold condos was 119 days and not a single sold unit received their original asking price. One sale of an oceanfront unit, closed for 73% its original asking price a year ago. That was a prolonged and probably stressful reality check for the seller. Just slightly less than half of the sold units closed for cash with no mortgage.

Highest sold price was $1.235 MM for a 4th floor direct ocean corner 3 BR, 3.5 BA in a 17 year old building in south Cocoa Beach while the median sold price was $305,000.

In contradiction to the statewide trend of increasing supply, the condo and townhouse inventory in Cocoa Beach and Cape Canaveral has continued its steady decline from a high of 405 units in late April to just 282 units for sale this morning, the first day of October. Average time on market for those 282 units is 117 days with almost a third of them already over six months without a buyer. Our slow season has traditionally lasted until the end of January when sales usually pick up again so those folks may have to wait even longer to find their buyer unless they are prepared to compete with the handful of sellers who are priced to sell. Until January we can expect more of the same slow activity barring some market-affecting macro event. Buyers, know what you’re looking for and know your target property’s fair value. Expecting a huge discount off asking price just because the market is slow is foolish. Expecting a discount because a seller is overpriced is reasonable but a low offer stands a much better chance of success if it can be justified by relevant comparable sales to support that offer. [Relevant is important as is the plural, “sales”.] Be smart whether you’re buying or selling and pay attention to the market. It is almost always right.

“Demand and supply are the opposite extremes of the beam… the price is the point of equilibrium, where the momentum of the one ceases, and that of the other begins.” – Jean-Baptiste Say