The 70% Coincidence

The human body is about 70% water. 70% of the earth's surface is covered by water and, remarkably, Cocoa Beach, according to Wikipedia, is about 70% water with over 10 square miles of water. For a waterman like myself, this makes for a very big playground. The aerial shot below demonstrates the land/water makeup of this special little town by the sea. As I write this on April 2nd, the temp is 72 degrees with a light east wind and sparse cotton ball clouds with a decent head-high ground swell that has been hanging around for going on two weeks now. The locals are very content these days.



"Coincidence is logical."
Johan Cruijff

One last piece of useless 70% info; Exactly 70% of the 82 condos sold so far in 2008 in Cocoa Beach and Cape Canaveral sold for less than $256,000. There has been a lot of activity in the last couple of weeks. I'll report on notable closed sales and deals in my next post. Welcome to the new readers in Sweden, South Korea, Japan, Java, Belize, U.A.E., Panama and Columbia. I'd love to hear from you and why you're reading this blog about Cocoa Beach.

"Surfing, alone among sports, generates laughter at it's very suggestion, and this is because it turns not a skill into an art, but an inexplicable and useless urge into a vital way of life."
Matt Warshaw

Math quiz

Good morning, Ukraine.

Remember those questions in the math section of the SAT or similar tests, the ones that went something like; Complete this sequence; 1, 2, ?, ? I'd like to submit a similar question to you. What is the next number in this sequence; 685, 648, 658, 595, 495, ?

Here's another sequence completed; 519, 529, 515, 500, 440, 390, 370, and the final number, 340.

Those sequences are actual histories of asking prices (in thousands) of individual condos, the last example taken all the way to the eventual selling price this month of $340,000. In my example, the sequence could be correctly completed in two ways, either 1, 2, 3, 4, a linear progression or as 1, 2, 4, 8 an exponential progression which these listing histories more closely resemble. My question would probably be more illustrative phrased as "what picture does this sequence of numbers paint?" The picture it paints for me is a hopeful but foolish seller being dragged kicking and screaming to reality. That first sequence beginning with 685 is an as-yet-unsold 2 year-old luxury penthouse condo on the river. That last drop yesterday of a full $100,000 tells me that reality is rapidly approaching. For other sellers playing this foolish game of chasing the market down, the final number in the sequence may turn out to be zero if they run out of cash while hoping for the white knight. Best of luck to those of you trying to sell. When you get it priced right, you'll probably be hearing from me.

MLS inventory March 27, 2008 Cocoa Beach & Cape Canaveral

Condominiums_______867 - 50 under $100,000
over $500,000________126 - only 4 sold since New Year's Day
Single family homes___139
over $500,000_________53

It's been 4 weeks today since I began geographic tracking of this blog's readers. We have had visitors from an amazing 48 states and 42 countries outside the United States. The shot at the top shows the location of the visitors from Europe in the last 4 weeks. Bigger dot means more readers. If you're one of those and have never emailed me, I'd love to hear from you and know what you get out of this blog or, even better, what you'd like to see. Thanks for tuning in.

Believe what you want, but don't believe it around here.
- John Candy

Where are the deals?

"What will you do if it's up? Change your diet?"
"No, change my doctor."
___92 year old having her cholesterol checked

A relevant edit would read, "What will you do if it doesn't sell? Lower your price?" "No, change my realtor."

One would think that with our tremendous inventory, deals would abound. That, however, is not the case. The level of denial and wishful thinking remains high. Many sellers are still of the mentality that there just may be an uninformed buyer who will breeze into town and snap up their over-priced listing without noticing that other similar properties are selling for less.

A couple of cases to illustrate the point: I showed a unit this week that is listed for $597,500. I sold the identical unit one floor higher for $445,000 a few months ago. In fact the last three sales in this building were all under $500,000. Wishful thinking will not make that unit worth over $500,000 and will certainly not make it appraise for more than the recent identical comps. Could I make my case and reason with the seller to accept an offer for $445,000? Possibly. I've done it before, but, it makes more sense for my buyers to approach a unit that is already priced closer to the comps.

Case number 2: A new listing in a popular oceanfront building hit last week for $429,900. Seems a little crazy considering that two identical units on the same floor are under contract for $290,000, your's truly on the buyer's side of one. The unit owner is aware of these units as this building notifies all owners of pending sales. I have buyers for this unit but with such unrealistic expectations, a deal is unlikely to materialize.

There are hundreds of similarly mis-priced listings. There are deals out there but they are buried within the over-1000 listings currently active in Cocoa Beach and Cape Canaveral. If you're looking, be careful. You don't want to be the angel that the Matrix-dwellers are hoping for. Be aware of the recent sales and the other similar listings and be able to recognize the ones that are priced right. Know when a lowball offer is appropriate and know when something is priced right. Your expectations of price may be just as unrealistic as the seller's. Best bet; find an animal of a buyer's agent who knows the market and be patient.

"Will it sting?"
"Well, it might sting a bit, but you won't mind too much"
"Well, actually, I would mind if it stings"
______Five year old being offered eye-drops.

Less is More

March has started with a bang with 21 residential contracts executed in the first 12 days in Cocoa Beach and Cape Canaveral. This is on the heels of a February that exceeded February 2007 in closed sales. Certainly not evidence of a bottom, but, encouraging nonetheless. Closed sales so far in March worth mentioning are;

Emerald Seas 3/2 closed for $340,000 - was asking $529,000 June/2006
A small Cape 3 BR beach cottage, 2 blocks from the beach $148,000
Canaveral Sands direct ocean, 2nd floor 2/2 furnished sold for $270,000
and, drum roll please, a Solana Lake 2/2 sold for $235,000 after being purchased one month earlier for $195,100.

MLS inventory March 12, 2008 Cocoa Beach & Cape Canaveral

Condominiums_______883
over $500,000________124
Single family homes____139
over $500,000________51

Closed sales in February

Condominiums_______31
over $500,000________2
Single family homes____9 (3 were foreclosures)
over $500,000________1

In memory of John D. MacDonald I will close with a quote from John Maynard Keynes, who Travis McGee fans will recognize as the namesake of the boat of Travis' economist friend, Meyer.

"The market can stay irrational longer than you can stay solvent."

Blue Pill or Red Pill?

Neo, This is your last chance. After this, there is no turning back. You take the blue pill - the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill - you stay in Wonderland and I show you how deep the rabbit-hole goes. Morpheus

That quote is from the movie, The Matrix, when Neo is offered a choice of two pills. The blue pill will leave Neo living in the false reality of the Matrix while the red one will show him the truth, reality. I wish that listing agents would include a red pill with every listing presentation. Looking at the majority of asking prices on our MLS today I have to accept that blue pills and false reality are still the overwhelming choice of sellers of real estate. Of the 19 closed condo sales so far this month, the average discount off the most recent asking price was $22,000. With the average selling price at $205,000, the discount amounts to 10%, not bad considering market conditions. However, if we burrow deeper into the rabbit-hole of the listing history of each property we find that the average discount from the original asking price was a whopping $74,000.00. In each case of properties with multiple price drops, the sellers could probably have realized a higher price had they just taken the bitter red pill of reality and priced their property correctly earlier. Taking the analogy one step further, the average difference between original asking price and the last asking price that led to a sale was $52,000.00. That, ladies and gentlemen, is the price of the blue pill of denial. Choose your medicine with care.

MLS inventory Cocoa Beach/Cape Canaveral Feb. 28, 2008

condominiums______889
single family homes__137

I regularly get asked why mortgage rates don't drop when the Federal Reserve cuts rates. For a good explanation, read this.

I don't know the future. I didn't come here to tell you how this is going to end. I came to tell you how it's going to begin. Morpheus

Bottom, schmottom

I got a good laugh this morning when I came across yet another real estate commentary making the ridiculous claim that the market bottomed in 2007. These bottom calls usually come from groups with self-serving interests. If you've read this blog for a while you'll remember my post on "Calling the Bottom" back in November. The market has not bottomed. Some individual properties have sold for prices that may represent the bottom for that particular property type, but, the amount of inventory coupled with the increasing number of troubled sellers is sure to push the "market" lower. However, real estate is not the Dow and no one buys the market. People buy individual properties. Forget the market and concentrate on the specific property type that you want and be aware of recent sales and asking prices of comparable properties. Most of all, work with someone you can trust. If your agent is using the B word; run, Forrest, run. Saying the worst is over for this market will not make it happen no matter how often or how loud one makes the claim. NAR is the worst offender as they began calling the bottom is the fall of 2006 and have been repeating it every few months since.

Having established that the market as a whole may move lower, an educated buyer can begin sorting through the isolated outstanding opportunities with an objective eye. Even if the market bottom happens much later, some buyers will have picked off the best deals months in advance of the overall low. All sellers are not at the same level of motivation, hence the wide disparity in asking prices. Consider the following sales that closed this week:

A never-lived-in 2350 sq.ft. 4 bedroom 2.5 bath luxury townhome with a 2 car garage that sold for $299,000 in 2006 closed this week for $195,000. That's new construction for an unbelievable $83 per square foot. You can't build this unit for that. Asking price on the last day of 2007 for this unit was $289,000. Definitely not a bottom then, however, at $195,000, this may very well be the bottom in this complex. Consider that there are seven units listed this morning in this complex for prices ranging from $289,000 to $410,000.

How about a unit occupying the entire 6th floor of an oceanfront building that closed this week for the original 2002 pre-construction price? Not likely to be repeated in this building.

I expect our inventory to creep back up after March as those units that were rented for the season come back on the market. Sales are holding at a level somewhat below this same time last year with only 17 closed condos in February as of this morning in Cocoa Beach and Cape Canaveral. This is good news for buyers as the pressure is still on the sellers. If you'd like to keep up with a specific property type and deals within that market segment, shoot me an email at larry@southcocoabeach.com and I'll keep you in the loop. In the meantime, all this bottom talk got me to thinking about how good our sand bottom has been for the surf recently. Here's an example of the results of a good bottom in south Cocoa Beach.



Everyone is entitled to their own opinion, but not their own facts.
Daniel Patrick Moynihan

Crumblin' down

Well some people say I'm obnoxious and lazy
I'm uneducated--my opinion means nothin'
But I know I'm a real good dancer.
.... the walls come crumbling down...
John Mellencamp

Looking north from south Cocoa Beach one fine morning last week.


Time again for deals of note. These are all sales that have closed since February 1, 2008 that are relevant for lowering the bar in their respective complexes which suggested the Johnny Cougar tune, Crumblin' Down.

2/2 Canaveral Bay, non-riverfront unit, 1023 sq.ft. sold for $100,000

2/2 Cape Shores, 2nd floor non-riverfront, 1038 sq.ft. closed for $110,000

2/2 Windrush, non-ocean 2nd floor fully furnished, 1240 sq.ft. $137,500

1 BR 2 BA Cape Winds ground floor weekly rental, furnished $167,500

2/2 Seminole Landings direct river, 1080 sq.ft. sold for $170,000

Surprising listings that have not sold include a 2/2, 2nd floor Water's Edge West with a mile wide view across the Banana River in south Cocoa Beach with the ocean across the street. Listed for $240,000 with a big private garage. In the direct ocean building across the street a big, second floor 2/2 has been dropped to a ridiculous $269,000.

Nothing astonishes men so much as common sense and plain dealing.
Ralph Waldo Emerson

If I had a million dollars...

Serendipity. Look for something, find something else, and realize that what you’ve found is more suited to your needs than what you thought you were looking for.
- Lawrence Block

Our market dynamics have shifted somewhat as we've moved into the second month of the new year. Our reduced inventory of condos would seem to suggest a recovery in this part of the market. The inventory of MLS-listed condos in Cocoa Beach and Cape Canaveral has dropped 17% from the high in May of 2006. However, when we compare the rate of sales we see that things aren't as rosy as that number alone indicates. In May of 2006 there was an inventory of 1047 condos with a previous month's sales of 53. Our February inventory is 866 with January sales of 23. That means that even with a higher number of listings in May 2006, the months of inventory was 19 compared to our current 37 months worth of inventory at January's sales rate.

The sales that are closing now have shifted heavily to the under $200,000 range (10 closed sales in Jan.) with the over-$500,000 condos barely moving (2 closed in Jan.). Looking at the current MLS inventory, we have only a 26 month supply of sub-$200,000 condos compared to a whopping 65.5 months of over-$500,000 condos. Add the dozens of not-listed new luxury condos to the MLS inventory and the real supply of half-million dollar plus condos is probably over seven years worth. That is not promising for those hoping for a sale. Even with a swift turn-around, that is simply too much inventory to absorb quickly. The sales that are happening in this price range are at substantial discounts to recent levels. Buyers with cash and the knowledge to spot the deals are picking off the few bargains as they appear. The bulk of the sellers in this end of the market remain firmly in Lala Land wondering why their overpriced luxury condo hasn't sold. Thanks to the Barenaked Ladies for the title which seemed appropriate.

The more difficult decision is usually the right one. -Unknown