REDUCED! ... meh

Looking up the channel along St. Croix from Fountain Cove.
Merritt Island in the distance and Banana Bay on left.

REDUCED! OWNER MOTIVATED! BRING OFFER! NEW CAR IN GARAGE! $50,000 DECORATING CREDIT! SELLER WILL PAY 2 YEARS OF YOUR MORTGAGE PAYMENTS!

Like Lisa Simpson, when I see any of the above or similar phrases in a real estate listing I usually yawn and say, meh. However, it's the last weekend of summer, seller sentiment is changing and the headline "REDUCED!" is starting to mean something. When I sift through the 129 price reductions on condos and townhomes in the month of August in Cocoa Beach and Cape Canaveral I'm seeing some serious price drops unlike the, mostly, baby step reductions earlier in the year. The pressure of the end of the summer season is apparently being felt and some of the reductions are significant. For example:

Villa Verde 3/3 in south Cocoa Beach from $1.35 million to $899,999
Ocean Terraces 3/2 reduced from $699,900 to $599,900
Cape Hacienda 2/2 from $315,000 to $225,000
Waters Edge 2/2 direct ocean from $259,000 to $219,000
Dolphin Beach from $240,000 to $129,900
Brisas del Mar from $185,000 to $120,000
Cape Shores from $199,900 to $119,900

I don't consider all of these to be good buys even at the newly reduced price but the amount of the drops tells me that the shift in seller mindset is speeding up in it's move towards acceptance and away from denial. Even with the highly picked-over inventory I suspect that the next few months will present opportunity for ready buyers. I would suggest, if you are going to be using a mortgage, that you go ahead and make contact with your lender before you start pursuing a deal. The rules for condo mortgages continue to change and you'll have more bargaining strength if you're already approved or paying cash. If you were pre-approved more than a couple of months ago, you need to talk to the lender again. Things have changed, yet again.

As of today, the Cocoa Beach MLS is showing 24 closed condo and townhome units in the month of August in Cocoa Beach and Cape Canaveral, well below last year's 39 sold units with nothing closed under $500,00. The number may drift up slightly as tardy listing agents update their listings next week. Hope you have a fun Labor Day. Be safe and close your shutters when you leave.

Homer: Kids... how would you... like to go to... Blocko Land??
Lisa/Bart: Meh.
Homer: But ... the TV gave me the impression that ...
Bart: We said "meh".
Lisa: M-e-h. Meh.

Notable August Condo Sales

Spotted dolphins playing around the boat in the ocean off Cocoa Beach.
__________________________________________________

As of this morning, August 23, we have had 18 closed condos in Cocoa Beach and Cape Canaveral in the month of August. Notable sales included:

Lowest price was $59,999 for a small 2/1, Star Beach unit in Cape Canaveral. This unit sold after being listed for only 3 weeks. The seller took 86% of his asking price of $69,900.

The highest price so far this month was $440,000 for a fully furnished, 3rd floor Mystic Vistas unit in the A building with an ocean view. This unit sold in 76 days for 88% of asking price. The selling price was $189,900 less than the seller paid for it in June of 2005.

A 3rd floor corner, direct Banana River 3/2 at Solana River closed for $350,700 after being listed for only 25 days. The seller got 95% of his asking price but sold for $84,300 less than he paid in March of 2005.

A 1725 sq.ft., 3rd floor, 2/2 Shorewood unit with a peek of the ocean sold for $236,000 after being listed five different times for an astounding combined 997 days with an original asking price of $464,900. It closed for 79% of the last asking price but almost double what the sellers paid when it was new in 1996. This is an extreme and costly example of chasing the market down and clinging to unrealistic expectations.

One of the bigger, 2348 sq.ft., Puerto del Rio units with a good river view from the massive, 4th floor wrap- around balcony closed for $233,000 or 78% of the original asking price in January this year. This was $54,000 less than the owner paid new in December 2003.

A Banana Bay townhome in Cocoa Beach sold for $161,000 in just 56 days, 89% of asking price.

And a Portside 1/1 with 943 sq.ft. sold for $92,000, lowest price yet in Portside and $23,900 less than paid for this unit brand new just two years ago.

We've seen four single-family homes close so far this month, all in Cocoa Beach, with waterfront prices from $340,000 to $570,000.

MLS inventory Aug 23, 2008 Cocoa Beach & Cape Canaveral

Condos, all prices_____742
over $500,000________93
Single family homes___119
over $500,000_________44

If anyone has a particular market segment or subject you'd like covered in a post here, please email me and I'll do my best to accommodate.

"Life is not a matter of holding good cards, but sometimes, playing a poor hand well."
_____________Jack London

The little storm that could - UPDATE 2

As I write this, Tropical Storm Fay has been sitting on Central Florida for 18 hours dumping rain and bringing winds in excess of 60 miles per hour. The center of circulation right now is directly over Cocoa Beach as you can see in the radar shot above and forward movement is down to 4 mph, so, we're in for another long, wet and windy day. I did not see any damage on the way in to the office from south Cocoa Beach this morning other than Yen Yen's old rusty sign that appeared to have a new angle of decline. The shot below is from yesterday (Aug. 19) afternoon. The rain and wind have been pretty constant since that shot and conditions are the same now, 9:16 AM Aug. 20.



The forecast track below shows the storm eventually moving out over the Atlantic just north of Cocoa Beach before turning west and bringing excitement to north Florida. In the meantime, school kids in Cocoa Beach got to miss two of the first three days of school and I'm sitting in the office enjoying the sight of empty streets and bending palm trees in the blowing rain out my window daydreaming about tropical weather days in the past.



"Rain showers my spirit and waters my soul."
_____Emily Logan Decens
____________________________

[Aug. 20 - 5 PM update]

The storm renewed it's assault early in the afternoon and by 2 PM the storm had stalled, the wind had resumed out of the opposite direction at +-50 mph and the storm drains are flowing backwards as the rain continues unabated.



At this point the news channels are claiming upwards of 20 inches of rain so far and another 10 inches possible by tomorrow. The river is up to and over seawalls along all the canal streets and those people with west and south river exposures are experiencing flooding and dock damage. I received a call from a friend on the river in south cocoa Beach with a report of a flooded yard and a loose jet ski banging into the dock. When I got there the waves were crashing over the seawall into the back yard and the jet ski was breaking itself and the dock with each wave. Three of us were able to lasso the thing and winch it over onto the dock without crushing any appendages.



This is the usually dry yard with the jet ski safely tied down, for now.



These are west facing docks on the Banana River in south Cocoa Beach about 4 PM this afternoon, Aug. 20. Ten more inches of rain predicted with diminishing wind. All low areas in the county are now flooded. The bright spot is that we experienced minimal beach erosion and wind damage. At this point it has all been about the historic rainfall amounts.



[UPDATE - Aug. 21]

By dark last night the rising river and persistent southwest winds had some west facing docks in danger and crews were scrambling to shore up seawalls and secure boats.

Noon:Thursday - The rain has stopped and the water is starting to recede although the river may take some time to go down. Kids will likely have to return to school tomorrow after this unplanned three day holiday and I'll return to my normal real estate related postings. As you can imagine, there has not been much activity since Fay first arrived on Monday. Live long and prosper.

New waterfront Cocoa Beach homes

If you've been waiting for the market bottom to pick up a new waterfront home in Cocoa Beach for less than $900,000, your list of possibilities has been whittled down to one. Two of the three that were available closed in the last two weeks and there are none under construction. It will likely be some time before someone risks building a spec home of this type again and prices will have to be higher than these last two closed sales for it to be a profitable venture. The never-lived-in house at 1011 Minutemen pictured below closed this week for $570,000 or $146 per square foot. If we take out the value of the land ($300,000) this very nice new house was purchased for around $70 per square foot. Original asking price two years ago when it was completed was $1,250,000. I presented an offer earlier this year more than $100,000 over the eventual selling price. Click here for a slide show of the house.



The other new house to sell was a 5 bedroom 3.5 bath on Esther pictured below. It closed two weeks ago for $580,000. Original asking price in March 2007 was $799,900. Click here for a slide show of that one.



Last remaining new waterfront home in Cocoa Beach asking less than $998,000 is a 2 year old, 4 bedroom, 2.5 bath on Blakey, asking price $549,000. If you must have new construction and are willing to give up the waterfront, you could always go for a 3 bedroom 3 bath, brand new 3495 square foot beauty at the Enclave across the street from the beach with no view for $995,000. Several available.

I'll parse the condo activity in my next post. The inventory at the moment is looking like a picked over bowl of popcorn. The good stuff has been eaten and unpopped kernels (unbending sellers) make up most of what's left.

MLS inventory Aug 16, 2008 Cocoa Beach & Cape Canaveral

Condos, all prices_____739
over $500,000________92 - 27 sold since New Year's Day
Single family homes___121
over $500,000_________44

" I look at a hundred deals a day. I pick one." Gordon Gekko

Waiting on a foreclosure

Sung to the tune of "Waiting on a friend" by the Rolling Stones.

I constantly get calls and emails from people wanting to pursue foreclosures and short sales in hopes of snagging a great deal. While there have been some outstanding deals in those two categories, there have also been equally outstanding deals in non-distressed properties. For instance, yesterday a big, direct ocean 2/2 condo in south Cocoa Beach was slashed to $219,000. This unit has no garage and the 2nd floor view is somewhat obscured by dune vegetation but at this price it's now priced below most river units of the same size. Someone's going to get the best deal of the year on the ocean here. It's not bank-owned nor is it a short sale. The 4th floor corner 3/2 at Ambassador Shores that closed last month for $235,000 was not a distress sale. Nor was the top floor 2292 sq.ft., 3/2 River Bend that closed for $265,000. My point is that, in your search for a deal, do not limit your search to distressed properties. There are occasional non-distressed properties closing at prices that qualify as "great deals" without the hassles and perils of bank-owned or bank-approved sales.

The numbers are in for July and we dipped below 2007 in total closed condos in Cocoa Beach and Cape Canaveral with a total recorded (as of this morning) of 35 sales. The highest price paid for a condo in July was $850,000 for a 5th floor northeast corner that sold new for $1,035,000 three years ago. A similar haircut was administered at Majestic Seas for a 6th floor southeast corner that closed for $712,500 which is $116,500 less than it's purchase price three years ago. John Edwards would be jealous. We had our busiest month of 2008 in the over $500,000 category with six units closed, two at the Meridian whose outstanding marketing team continues to pull rabbits out of an empty hat.

According to the tax appraiser's site only 12 of the May 17th auction units at Mystic Vistas had closed by July 23, so, I guess the early rumors of 20-something sold were inaccurate. The lowest recorded price was $181,500. I suspect this was the unit that sold for $165,000 with a 10% buyer's premium added. The math works.

If our seasonal trend holds true sales should drop significantly through the end of the year. The chart below shows what we can expect for the rest of the year if we follow 2007. The steep decline after August below looks the same if we chart the previous five years. As a buyer, expect to have more bargaining power during this slow time although you'll be dealing with reduced inventory as many sellers pull their listings off the market until spring. If you're selling, well, I won't repeat my broken-record message. You know the drill. Your time for action is now.



Single-family home sales were brisk in July with 11 closed sales bringing the total closed MLS-listed homes in Cocoa Beach and Cape Canaveral to 60 since January 1, 2008. Current inventory stands at 123. Lowest price, $147,500 and highest, $1.75 million.

Condo inventory is now at 746 with the lowest asking price, $49,000 for a small 1/1 Atlantic Gardens unit in Cape Canaveral, and the highest, $1.95 million for a 5000 sq.ft. new direct river penthouse in south Cocoa Beach. Until next post, be careful out there. There are hungry wolves wearing Time2Buy buttons who would love to eat you for lunch.

"I have known a vast quantity of nonsense talked about bad men not looking you in the face. Don't trust that conventional idea. Dishonesty will stare honesty out of countenance any day in the week, if there is anything to be got by it. "
________Charles Dickens

Easter Egg in the Housing Bill

Other than the colorful boiled eggs hidden for children at Easter, an easter egg can also be a hidden message in software, DVDs, video games and even books. For instance, to instantly force a win in Windows solitaire, simply press Alt + Shift + 2. Voila, you win. For owners of real estate who sell their primary residence after December 31 this year, the easter egg waiting for them is the new ratio formula for pro-rating the $250,000 per person capital gains exclusion. Until the end of this year, the rule is that one needs to have lived in his home for at least two out of the last five years to qualify for a $250,000 ($500,000 for married couples) capital gains exclusion on the profit in the home.

Four pages from the end of the 694 page, well-intentioned but mainly misguided "Housing and Economic Recovery Act" passed into law this week, the bomb begins with the wording "Subsection (b) of section 121 of the Internal Revenue Code of 1986 (relating to limitations) is amended by adding at the end the following new paragraph:"

What follows, in summary, allows for the amount of tax exclusion to be proportional to the number of days the home was "primary residence" divided by the days the home has been owned. For example, if I've owned a property for the last five years and that property has been my primary residence for the last two years, the impact of the date of sale for me, a married man, will be;

A: sold by Dec. 31, 2008 - up to $500,000 of capital gains will be tax-free

B: sold after Dec. 31, 2008 - up to $200,000 of capital gains will be tax-free

The reality; selling after the last day of this year could cost me up to $45,000 in taxes depending on my total profit from the sale. This is only my interpretation of the wording. I am just a well-read, way-too-involved real estate guy. If you are in a position to be affected by this change, do not trust my take but get thyself to an accountant, tax lawyer or other qualified person and get professional advice. You may profit from notching up your efforts to get your property closed before New Years. The sad reality for most people who have owned for less than five years is that there will likely be no capital gains to protect. Thanks to Dan Green of the Mortgage Reports Blog for bringing the egg to my attention.

July has ended and the sales, as recorded by today, August 2nd, fell behind last July's tepid total. We had a total of 42 closed MLS-listed, residential properties in Cocoa Beach and Cape Canaveral, 11 single-family homes and 31 condos. The bright spot in this otherwise dull month was the view from the buyers' side of the closing table. Someone stole a 4th floor River Bend, 2292 sq.ft. unit for $265,000. A 3250 sq.ft. brand new 5/3.5 canal-front home went for $580,000, less than you could buy the land and build it for. Another older 3/2 canal-front home with dock and boat lift off Minutemen Cswy. sold for $295,000. And, in what will likely go down as the smoking deal of the year, I represented the buyers of a direct-river estate on three quarters of an acre of direct wide open river with over 130' of waterfront with dock, boat lift and massive riverside tiki bar (pictured above) with lush mature landscaping, across the street from the beach. Listed last year for $1.9 million and closed in July for $670,000.

I count 135 condo listings this morning in the Cocoa Beach and Cape Canaveral MLS that have been listed for longer than a year. Add the other listings whose "days on market" number has been manipulated and the newer but severely over-priced ones and we have a lot of sellers who have yet to face the reality of the changed market. I can't say this enough; if your neighbor just sold his identical unit for $100,000 less than you're asking, your unit is not really for sale. His motivations for selling DO affect your property's value whether you share his circumstances or not. Either face that reality and price your property accordingly or pull the For Sale sign out of the yard. The stress of waiting for that rare buyer who is willing to overpay for your place is not worth it.

I would also offer another piece of advice. Choosing to get a renter while waiting for the market recovery has, so far, been an expensive decision. With the exception of a few weekly rental oceanfront condos, almost no property purchased in the last five years can generate enough rent to cover expenses. Add the chances of repairs, assessments, depreciation and lost opportunity and the decision to rent could cost far more than just cutting the price now to a level that will generate a sale. I feel for you if you're in this position but you need to rationally evaluate your choices. The right decision is often the more difficult one.

Until next post, I'm enjoying the glorious sunrises of the last two weeks and the daily afternoon thunderstorms. Cocoa Beach has been exceptionally beautiful this summer and we're approaching my favorite time of year, that magic period between Labor Day and Christmas when the weather has cooled, the fish are biting, the surf is good and the roads and beaches are deserted. If you've never experienced our town during this time, plan a visit. Rentals are discounted and you'll have the run of the place along with a few locals.

Give me things that don't get lost.
Like a coin that won't get tossed.
_______Neil Young's "Old Man"

Surprise, surprise

Here we go, again. After the passage of Amendment One, the property tax relief bill supported by the Florida Association of Realtors among others, there was wide speculation that individual cities and counties would increase millage rates to make up for the lost revenue. Orlando appears to be among the first to float that idea. In last Tuesday's Council meeting the majority of members stated their support for a 21% increase in the millage rate to make up for the $30 million budget gap that resulted from the passage of Amendment 1. Most of us who opposed Amendment 1 did so because we doubted the willingness or ability of the bureaucracy to reduce spending and expected offsetting higher millage rates in the wake of successful passage. I don't have a solution but slashing taxes at the state level without a solution for replacing the revenue doesn't seem well thought out.

Now, the same groups are pushing for support of Amendment 5 or, as they are calling it, "Amendment 1 on steroids". As before, the Florida Association of Realtors supports slashing property taxes because they believe that will increase sales activity, which is, naturally, their primary concern. And, as before, they have no solution for replacing the lost revenue other than a one cent increase in the sales tax which will still leave an $8 billion with a "B" shortfall. As a dues paying member of both the Florida Association of Realtors and the National Association of Realtors, I am embarrassed by their wasteful, self-serving campaigns ranging from NAR spending $30 million in 2006 and 2007 to tell the public that "Now is a great time to buy" and the current $1 million campaign by FAR to entice the public into supporting a bill that is likely to backfire just like Amendment 1 is now beginning to do. For the record, if it's not clear from the above, I oppose this half-baked idea to reduce property taxes. I support lower taxes but this just ain't the solution.

"Prices have stabilized and are starting to rise."
___November 2006 - National Association of Realtors ad, NY Times



"I triple guarantee you, there are no American soldiers in Baghdad."

The Sweet Smell of Summer

One of the sweet smells of summer in Cocoa Beach, frangipani (aka plumeria).

As of today, the 24th of July, we appear to be on track to closely mirror last year's sales for the month of July in Cocoa Beach and Cape Canaveral. For the last five years, sales have peaked between April and June and then trended down to the lows of the year between October and January. Typically the number of closings falls off the cliff in October reflecting September's abrupt drop in sales activity and doesn't recover until February. I expect the same for this year.

Recent sales of note include a 4th floor, direct river 2/2 at Four Seasons in Cocoa Beach for $185,000 and a 5th floor, direct river 2/2 at Sunset Harbor that sold for $165,000. Best oceanfront deal of the month was a 4th floor, north corner 3/2 Ambassador Shores unit that I was able to negotiate on behalf of a buyer for $235,000. Unfortunately, our contract was taken away by another owner in the first right of refusal process that is in place at that building. We have had two $500,000+ units close so far this month, one of them a new unit at Meridian on the ocean. Of the 21 MLS-listed condos to close so far this year for over a half million dollars, nine have been at Meridian. I hope the buyers agents are doing the right thing and disclosing in advance and sharing with their buyers the excessive commissions being paid to them by the developer. Long-time readers of this blog know my stance on agent incentives. The practice reeks like shrimp heads in a hot dumpster. If you never read my first posts on the subject you can read them here.

Single-family home sales have been tepid with only three closed sales so far this month. One was a small but very cute 2/1 home with a pool one block from the ocean and 1/2 block from the river in south Cocoa Beach that went for $195,000. There are pending deals set to close soon that will cause some teeth-gnashing and rending of garments. I will report on them as they close.

As of yesterday, ten of the developer's auctioned units from the May 17 auction at Mystic Vistas in Cape Canaveral have been recorded on the property appraiser's site for prices ranging from $181,500 to $275,000. These were all new units from 1686 to 2059 sq.ft.

From Bankrate.com: "This week (July 17-23), 70 percent of the panelists believe mortgage rates will rise over the next 35 to 45 days."

MLS inventory July 24, 2008 Cocoa Beach & Cape Canaveral

Condos, all prices_____753
over $500,000________95 - 21 sold since New Year's Day
Single family homes___125
over $500,000_________44

For those of you waiting for an outstanding deal, the pickings are slim. There have been very few priced-right new listings in the last few months and the ones that have appeared have been quickly snapped up. Be ready to pounce if you want to steal something and don't rely on the tardy listings at some of the popular real estate web sites. Your buyer's agent, if she's good, is your best weapon for early notice of hot listings. Justify your low offers with comps and/or well articulated reasons for a better chance at success.


"Honesty is never seen sitting astride the fence."
_____________Lemuel K. Washburn