Going for the gold

Thunderstorm over the Cocoa Beach golf course

Multiple offers have become the new normal in our market. I submitted an offer on a short sale Cocoa Beach canal home last week. There were 12 offers in the first five days with $10,000 above asking not being enough to win. Of four houses I planned to show yesterday two had contracts between Thursday and Friday, one of those receiving three offers. A third of the condos closed so far this month in Cocoa Beach and Cape Canaveral and almost half of the single family homes were on the market less than a month before going under contract. A couple of things are contributing to this. There seem to be a lot of buyers who were waiting for prices to bottom or stabilize who have now begun actively offering on properties. Add that increased demand to the depleted supply and, Voila, multiple offers on any new offering that's priced right.

Another shift in activity is increasing numbers of condo sales in the higher price range. In the first three months of the year 19 condos closed for more than $300,000. Since April 1 we've seen 29 closed units over $300,000 with eight of those over $500,000. Meridian has been a large part of that activity with seven units selling in 2012, all over $520,000. Other active luxury buildings in 2012 include Constellation and Villa Verde with five sold units each and Magnolia Bay with twelve.

This morning there are a total of 291 MLS-listed condos and townhomes for sale in the two cities and a mere 47 single family homes. Those looking for a river or canal home in Cocoa Beach have but 21 from which to choose. Lowest price for a livable waterfront home is $261,000 for a tiny 3/2 with a view of commercial property across the canal. Of the total residential inventory (condos and homes) 12% are either short sales or a foreclosures. That number was 56% two years ago.

We experienced a pleasant weather phenomenon yesterday, one that happens every so often in the summer. After a few days of west winds the warm surface water near the beach is pushed offshore and the cold water underneath moves in to take its place. The result for us is natural air conditioning as soon as the sea breeze kicks in. While the rest of the state and country was sweltering we were enjoying a cool breeze in the low 80s off the ocean under beautiful blue skies. The photo at the top was from last week, another normal weather pattern for us in the summer, afternoon thunderstorms. Eight more days until lobster season.

"Stay thirsty my friends." __The most interesting man in the world

Short sale timelines

Earlier this year real estate grunts were pleased to hear that some of the big banks were going to streamline their short sale approval process. This was welcome news to me as dealing with the prolonged, nonsensical short sale process is one of the most frustrating parts of a buyers agent's life. Alas, it was not to be, at least not the intended result. The process may have been streamlined somewhere behind the lenders' curtain but out here on the front end, the period from contract to closing appears to be taking longer than ever.

I pulled stats for all closed residential short sales in Cocoa Beach and Cape Canaveral since May 1, 2012. There were 21 short sale condos, townhomes and single family homes closed in the period. Two of the 21 were previously approved and both closed in one month from contract date. Of the remaining 19 sales, the average time from contract to closing table was 118 days. Longest time was 270 days and shortest for a not-previously-approved sale was six weeks. Half took four months or longer.

Best case scenario for a buyer hoping to purchase a short sale is to find a property with an approved price that another buyer has walked away from. In the event of an unapproved sale, be prepared to wait for months often with no progress reports along the way. Buyers and their agents are at the mercy of the listing agent and getting status reports from some of them is akin to pulling teeth. I am in the fourth month on one short sale right now. Contract was submitted to the listing office first week of March with proof of funds with the contract which is normal with a cash offer. Six weeks later they informed me that "we are getting there" and asked for a more recent proof of funds. One month after that I am told "we are moving in the right direction". I ask if there is something more specific I can report to the buyer. Answer: "Yes, Once a processor has been assigned (next week, hopefully), the end will be in sight." One week later (eleven weeks in) I get a message that the BPO is being done. Five weeks pass with no contact from listing agent. I ask for another progress report. Listing agent informs me (16 weeks since initial contract) that she was told by the title company that we "should" be there in another 45 days.

As always with short sales, we're ready to close but our search for a property continues while the bank picks its nose.

"Not all information is beneficial." _____Ben Bernanke

Terminal velocity [updated]

Reported MLS condo sales for June continue to trickle in as the listing agents get around to closing their listings. As of this morning the total stands at 61 closed MLS-listed condos and townhomes in Cocoa Beach and Cape Canaveral for the month of June 2012. That's on the heels of May's 66 closed sales which was the busiest month since 2005. In fact, three of the top five busiest months of the last 81 months have occurred since March this year. Sales in the $300,000+ range have been helped in large part by ten closed sales this year at Magnolia Bay in south Cocoa Beach. Meridian on the ocean in north Cocoa Beach has been active as well with six closed sales this year at prices between $521,250 and $599,000.

Inventory of condos and townhomes in Cocoa Beach and Cape Canaveral today, July 12, 2012, stands at 283 units or 73% off the high of 1049 units for sale in November 2006. There are 31 units asking less than $100,000. That's the same number of sub-$100K units that have closed in the last eight weeks. Distressed sales are at 13% of the current for sale inventory with about a third, eleven, of those in the Pier Resort. Asking prices in the five year old building are $188,000 for the 1900 square foot 3/3 units and $299,000 for the 3400 square foot 3/3s.

Activity on the ground hasn't changed much in the last month. I'm seeing lots of multiple offer situations when priced-right new listings appear. I'm also seeing a greater occurrence of failed offers than in the past as buyers expectations have lagged the market reality. Buyers of real estate in our small market, in most cases, are going to have to accept that the super low closed price of a comparable unit earlier this year or last year may not be repeated in this cycle. I said this before but it bears repeating. The bottom in most condo complexes will be represented by a single sale. Clinging to the hope of matching or bettering that $150,000 Mystic Vistas sale from two years ago has, so far, been fruitless. So has finding another 2/2 Sandcastles for $140,000. I'm confident in predicting that these sales will not be matched or bettered anytime in the near future. There are dozens of other complexes where, like these two, the bottom sale has probably already occurred. This is, of course, my opinion. I could be wrong. Be aware that if you are holding off on a purchase because you think prices are headed lower that you're going to have plenty of competition if that comes true.

[update] To expand on the reader's comment about the lack of detail in the tax record; The property appraiser does attempt to code and identify transactions that are not normal sales. There are over 40 codes for things from "atypical amount of personal property" to, as in the mentioned sale, "transaction between affiliated parties/family/corp." List of all disqualification codes here. For stats on this blog, unless I state otherwise, I use only MLS sales as there is more (still not 100%) transparency. Even with MLS sales, if a sale looks abnormally high or low, there is probably more to the story than the numbers reflect. We've seen developers record sales at numbers higher than the actual selling price by giving buyers a decorating credit at closing. We see other sales record at lower than actual selling price when personal property/furnishings get broken out of the contract and assigned an above market value on a bill of sale. That is one of the reasons that just one comp is not enough to establish fair value. Your single cherry-picked comp justifying your otherwise crazy asking or offering price means nothing to an informed party. If it doesn't look right, it probably isn't. [update]

Take-away: Be realistic about your expectations if seriously hoping to purchase in our market. Prices have not jumped significantly in most cases and, for someone who wants a Cocoa Beach getaway, purchasing slightly above the rock bottom will probably have little impact on the enjoyment of toes in the sand. I would also advise care in internet research. There is a lot of misinformation out there. Recorded sales prices don't always tell the whole story and claims on agent websites are sometimes misleading and always self-serving. The best deal in Florida real estate is free. It's a well-informed, experienced buyer's agent with no connection to the seller. Buyers of Florida real estate would be well-advised to find a buyer's agent they can trust and following his lead.

Today's buzz words; hydration, sunscreen and speed limits. Forget any of them at your own peril.

"I have made this letter longer than usual because I lack the time to make it shorter." ____Blaise Pascal

June property sales

Today is the last day of June and most (but not all) MLS sales for the month have been posted. Single family home sales were very strong with 11 closed sales in Cocoa Beach and Cape Canaveral. Over half the homes were on the market less than 55 days. Five of the eleven sold for cash and seven were waterfront. Four were short sales and none were foreclosures. One of the short sales took only 35 days from contract to closing table. The longest took seven months to wade through the process.

We are left with 45 single family homes for sale this morning in the two cities. Of those, 27 are waterfront and zero are distressed (short or foreclosure).

It was another banner month for condo sales as well with 55 closed sales recorded as of this morning. Of those, 13 were short sales or foreclosures. Twenty sold for $100,000 or less and two closed for more than $500,000. 29% were on the market less than a month before selling.

Our MLS condo and townhome inventory is at 281 total units for sale in the two cities. Six of those are pre-sales in a proposed building. 27 units are asking over $500,000 and 28 under $100,000. Guess which ones will be gone first. Two thirds of the condo listings are in waterfront complexes. 12% of the total (34 units) are distressed with 11 of those in the Pier Resort.

There are 126 condo units currently under contract, half of those distressed.

We are seeing closed prices notching up in a few complexes. It seems a natural response to the supply and demand dynamic that is exerting itself once again with the abnormally low inventory. The disappearance of large numbers of distressed listings is also contributing. This may not be a duck but the waddling and quacking is beginning to look rather duckish.

While most of the country has been sweltering in the triple digits, Cocoa Beach has had a wonderful stretch of balmy weather after Tropical Storm Debbie passed over the state. Judging from the number of tracks I'm seeing on the beach, this looks to be a busy year for sea turtle nesting. Remember to turn your beachside lights off by 9 PM and make sure no light from your dwelling is visible from the beach distracting nesting turtles. I hope everyone enjoys the upcoming holiday and is safe. Hydrate and use your sunscreen. Cocoa Beach fireworks are on Monday the 2nd rather than the 4th.

"Do I contradict myself? Very well then I contradict myself. I am large, I contain multitudes." ____Walt Whitman

Anatomy of a flip gone bad

As I was doing my early morning MLS hotsheet yesterday to see what new activity had been reported in Cocoa Beach and Cape Canaveral overnight, I noticed that a house I'd shown a few times over the years had closed. It was a 50 year old canalfront 4/2 with 1764 square feet in Snug Harbor. Knowing that it had been a while since I had first shown it I checked the listing activity to refresh my memory. It went something like this:

It was listed by the seller in the summer of 2005 after he purchased the house for $570,000. Hoping to flip for a quick profit he immediately listed at an asking price of $699,900. Less than a month later the price was jacked up to $825,000. Now remember in 2005 you couldn't turn around without hearing a story or news report about the new paradigm in real estate. Heck, even the National Association of Realtor's chief economist had just published in February that year a book entitled "Are you missing out on the real estate boom? Why home values and other real estate investments will climb through the end of the decade - And how to profit from them."  Perhaps the seller had just picked up a copy of the book. I wonder how many people's lives were ruined after reading David Lereah's ill-timed tome or listening to his NAR propaganda during that time. [edit] By the way, adding insult to injury, David Lereah followed up in spring 2006 with an even more damaging missive entitled, "Why the real estate boom will not bust - and how you can profit from it." Yikes.

In January of 2006 the seller lost a wee bit of his irrational exuberance and trimmed the asking to $779,000 where it remained until March when he brought the price back to where he started 10 months earlier, $699,900. In July, exactly one year since first listing, he reduced the price by $50K to $649,900. By Labor Day we were starting to see signs that the party in run-away appreciation might be winding down. The seller was apparently not paying attention and kept the asking price unchanged until February 2007 when he made a bold price reduction of $200 to $649,700.. Perhaps he was encouraged by NAR's new $40 million  advertising campaign "Now is a great time to buy (or sell) a home." At any rate, something happened and he chopped the asking price to $499,000 on April Fool's Day. This would have been just enough to pay his $450,000 mortgage and closing costs and escape with only the down payment lost. Unfortunately, by this time, similar houses were no longer selling for anywhere close to that price.

Apparently, still willing to accept a loss, he dropped the price again two months later to $479,000. It stayed there until October at which point, motivated by who knows what, he raised the price to $649,000 where it stayed for one month until coming back to $499,000 (our April Fool's price) in November 2007. It stayed at that price until March of 2008 when it was raised to $590,000 where it stuck until 2009.

Come January 2009 the price was reduced to $549,000 where it stayed for three weeks before being pulled back to the April Fool's 2007 number of $499,000. The seller apparently liked the $499,000 number as he stayed put at that mark for over a year until March of 2010 when he whacked the price down to $399,000 where it remained until October of 2010 when the listing expired.

It disappeared from the MLS at that point for a year until it came back on as a short sale asking $279,000 in October 2011. It had a contract within a month and finally closed yesterday for $240,000. The bank lost over $200,000 and the seller lost over $100,000 during his seven years of ownership. The original seller who sold the house to him in 2005 made a tidy $358,000 profit after owning the house for five years. Timing is everything.

"Like the ski resort full of girls hunting for husbands and husbands hunting for girls, the situation is not as symmetrical as it might seem"  _____Alan  MacKay

By the numbers

Cocoa Beach and Cape Canaveral, where we are and where we've been.
Data from the Cocoa Beach MLS.

Condominium units for sale
June 2012 - 277 - down 50% from 556 units in June 2010
Pending sales - a whopping 136

Distressed condo listings as a percent
June 2012 - 13% - down from 56% of all condo sales in 2010

Months supply * - at most recent month's sales rate
June 2012 - 4.2 months - down from 10.9 months in June 2010
* this does not include pending sales

Single family homes June 2012
For sale - 46
Distressed - 1
Months supply - 3.3
Pending sales - 25

The high number of pending sales is due in part to the large number of previously contracted distressed sales working through the longer than normal contract to closing period. Over half of the pending sales are distressed. The rate of condo units going under contract was almost exactly the closing rate in the most recent month. That rate is holding steady with 43 condo units getting accepted contracts so far in June. The writing is plainly on the wall. Barring divine intervention during the summer the piper will be demanding his check by Labor Day. Might be time for local Realtors to be planning an extended fall vacation.

"You can deny reality; but, you cannot deny the consequences of denying reality." ___Ayn Rand

Meet the buyers - again

We had quite the electrical storm over the ocean yesterday

The media has recently been reporting (yet again) about the large numbers of foreign buyers active in the Florida real estate market. I thought I'd get under the hood and extract the data for the Cocoa Beach and  Cape Canaveral market. I've been asked, incidentally, if there is a website or a function in our MLS that gives me these statistics with a few key strokes. Unfortunately, there is not. I have to manually wade through sales, either from the property appraiser or the MLS or both and look at each sale to get the numbers that I present here. If there was an automatic function in the MLS it couldn't be trusted anyway considering the manipulation by those entering the data. Example: days on market. Almost every day I see old listings withdrawn and relisted to set the DOM clock back to zero. At any rate, these numbers were extracted from the most recent 50 condo sales recorded on the Property Appraiser's site in Cocoa Beach and Cape Canaveral, 25 in each city with one bank Certificate of Title excluded for a total of 49.

It looks like those large numbers of foreign buyers are active elsewhere in Florida. Of the 49 sales I examined only four buyers were from other countries, two Canadians and two Europeans. Twelve of the buyers listed the property as their mailing address which usually indicates that it is for their primary residence. Of the 33 remaining, eleven were Florida residents, sixteen were from eastern states and six were from states west of the Mississippi.

While I was at it I thought I'd revisit the Property Appraiser's "market value" as compared to the actual selling price. The average variation wasn't as great as the last time I looked but the outliers were still extreme. One condo was valued by the PA at 204% of the amount that it actually sold for. Another had a "market value" that was only 51% of the selling price. The PA's average market value for the 49 sales was 81% of the selling price which is right in the range that they hope to be. However, as long as the ends of the scale are off by a factor of two, "market value" should be used for entertainment purposes only, the same as Zillow.

Total condo inventory this morning is 283 in the two cities. Thirteen percent of those are either short sales or foreclosures with eleven of the foreclosures in the Pier Resort complex. We're down to 46 single family homes for sale with a lone distressed sale in the mix.

Someone caught a mixed-up130 pound yellowfin tuna in 140' of water off Port Canaveral from a 19' boat last week. They fought the fish for four hours but finally landed it and brought it back to the dock to everyone's surprise. We usually have to go to the other side of the Gulf Stream for these tunas, a trip of 60+ miles each way, and a 130 pound fish is a monster. Yours truly made a freediving, spearing trip yesterday and managed his first mahi on the spear, quite the accomplishment, at least in his own little mind. We also got a hefty cobia and some snapper on the spears. Summer fun in Cocoa Beach and tasty fare for the families.

“It almost looks like we’re in cahoots in the sunshine,” CB commissioner Skip Williams

Parsing May

A reminder from 2004 hurricane season

The numbers are in and May was another record setting month for residential sales in Cocoa Beach and Cape Canaveral. According to the Cocoa Beach MLS there were 14 single family home sales in the month, all but two in Cocoa Beach. The highest priced Cape Canaveral sale was a small 3/2 in decent condition a few blocks from the beach that sold for $172,000. Prices ranged from $130,000 for  a small 3/2 fixer-upper on West Volusia to $1.25 MM for a direct ocean 5/4 beauty with 3800 square feet in south Cocoa Beach. Eight of the fourteen closed for cash.

There have been only two months in which 60 or more MLS listed condos closed in our two cities since June of 2006, first in August 2011 and again in May of 2012. There have been 61 unit sales recorded as of this morning. As always, that number will likely increase as snoozing listing agents get off their behinds and close their listings. Twenty of the sales were for less than $100,000 and only six for $300,000 or more. The only condo to sell for more than $360,000 was the entire 4th floor Riomar in south Cocoa Beach. This 3008 square foot unit recorded for $675,000 but there were non-cash concessions that indicated the actual selling price as over $700,000.

Bayport in Cape Canaveral contributed four of the sales at blowout prices as low as $73 per square foot for a six year old 3/2 unit.

Magnolia Bay sold two more 2nd floor luxury units at very aggressive prices. Remaining inventory there is getting slim.

A Perlas del Mar luxury townhome in Cape Canaveral that sold new in 2007 for $450,000 closed as a short sale for exactly one third the original price. Stupid cheap at $64 per square foot. Try building one for that.

The last of the developer foreclosures at Mystic Vistas closed for $195,000. There are currently only three listings in the complex, lowest asking price $299,900.

Of the 61 closed sales in May, five were short sales and eight were foreclosures. Two thirds sold for cash. One by-product of the robust sales is a rapidly declining inventory. There are but 49 single family home listings in the two cities this morning. One is a short sale and there are zero foreclosures.

There are 289 active condo and townhome listings. Twenty are short sales and twenty are foreclosures. Of these forty distressed listings only one is direct ocean, a ground floor 3/2 in Cape Canaveral asking $249,900. Pickings are slim.

“How did you go bankrupt?
Two ways. Gradually, then suddenly.”
_______Ernest Hemingway