Persistance

The slowdown in sales that I commented on in my last post, Cooling Trend, is persisting. The rate of new listings is not keeping up with the rate of sales. The inventory of  condos and townhomes in Cocoa Beach and Cape Canaveral this morning is 267 units if I include 19 non-existing, pre-construction units and 9 over-priced units that have been for sale and sitting empty since their construction six and seven years ago. That leaves us with 239 units of which another 33 have been for sale longer than nine months, several for years, indicating unrealistic pricing. An overflowing handful of other listings have had their days on market manipulated to appear as not having been for sale forever so the "really for sale" inventory of condos and townhomes in our market is below 200 units, probably below 150 if we filter out anything asking 20% or more above market value. That dearth of inventory, not a lack of interested motivated buyers, is the reason for our current sales rate of about one condo closing per day. We averaged over two per day the first half of 2014. I don't see any near-term catalyst that will be improving that. If anything, we may see sales decline even more as we move into the fall months.

Back to the mid 90s today. I can't imagine living anywhere but the coast in Florida. No matter the heat, we can count on the cooling sea breeze by early afternoon most days. Get away from the coast and the heat index goes Richter. The theme parks and inland golf courses must be especially brutal this time of year. Thankfully, the Cocoa Beach Country Club course sits on an exposed peninsula in the Banana river so it is exposed in most places to any breeze.

Our next scheduled launch is a SpaceX Falcon 9 in four days. Check the schedule of all upcoming launches HERE. A tropical storm could be influencing our local weather by the end of next week. A poorly organized mass is approaching the Lesser Antilles right now and moving northwest but not expected to have favorable conditions for turning into anything significant. Meh.

"Someone who is nice to you but rude to the waiter is not a nice person." anon

Cooling Trend

The crazy pace of sales in Cocoa Beach and Cape Canaveral has slowed. After a blistering first half of the year for property sales, July returned to a more sedate pace. My constant predictions about a coming slowdown have until now been entirely wrong. It seemed impossible that we could sustain an average pace of 63 sold condos a month with an inventory of around 250 existing units. Somehow we did until July. As of this morning, the Cocoa Beach MLS is reporting a total of 45 sold condos and townhomes in the month of July and 11 single-family homes. That's compared to 67 condos and 14 single families in June. There are 255 existing condos and townhomes for sale at the moment along with 19 very-optimistically offered pre-construction condos.

I expect the slowed pace to continue. Eleven of the 255 for-sale condos are bank-owned and six are short sales. The days of high numbers of distressed sales are, for the most part, behind us. We are at the lowest ratio of distressed offerings since the first short sale closed in our market in 2008. There are 27 pending distressed contracts yet to close so the boost in numbers from those will be inconsequential. While no one was looking, our market has returned to a healthy supply and demand dynamic. Demand exceeds supply by a good margin at the moment.

Of the 45 closed condo sales in July, 25 sold for cash. Only one of the sub-$100,000 purchases was with a mortgage. A quarter of the condo sales were at prices above $285,000 and a quarter were below $107,000. The higher priced sales were a good mix of ocean and river units.

There are currently 47 direct ocean listings. Six of those are asking $250,000 or less, most in that range in older buildings along Ocean Beach Boulevard. Twenty of the units have been for sale for over 300 days telling us that they are most likely overpriced.

I hope those of you who are surfers got to enjoy our first, brief hurricane swell this week as Bertha passed off our coast. Yours truly missed it completely while scalloping off Florida's west coast. On a bright note, the scallops are thick this year and my crew was able to limit out every day in less than an hour of snorkeling the grass flats. If you've never done it, it's a great activity for kids and adults alike and the bounty is very tasty.

"...one of the worst things society has done is name adipose tissue the same thing as a macronutrient."  comment on fat by a random Redditor

Big One Fails Again

It's happened again. A bushy-tailed loan officer promises he can loan on a condo and then discovers right before closing that the particular condo complex will not satisfy his bank's lending guidelines. The twist is that in this case the lender is local. I chant the "use a local lender" mantra constantly but it appears I need to qualify that. An overconfident, inexperienced local loan officer can blow your deal up just as effectively as the banker cousin back in Fond du Lac.

In this particular case the agent (not me) recommended a local lender who offers a specific loan product for unwarrantable condos, which this one was, to the buyer. The buyer elected instead to go with a local branch of the number one mortgage originator in the nation. The loan officer energetically claimed that he could do the loan. Remember the "Does This Make My Butt Look Big" post? He was just doing his job even though he didn't know there was no way his bank would loan in this particular complex. Any loan officer experienced with condos in our market would have instantly recognized that this condo-tel would be a problem, if not impossible, loan. The buyer didn't find out that the lender couldn't loan on the unit until well towards closing and is now scrambling trying to rescue the purchase through the originally recommended local lender.

Our takeaway here is that it is better to have a lender who can close the deal than one who promises the lowest rate or the bank with the most recognizable name. In addition, prospective condo buyers would do well to familiarize themselves with possible hurdles. My "Condo Mortgage or Root Canal" post from three years ago listed the major items that the lenders want to see in condo associations. A weekly rental unit may be attractive for the income possibilities but any condo that allows weekly rentals is going to be a mortgage challenge for multiple reasons. Ask your agent for recommendations for lenders who have products available for problem complexes.

I hope the surfers among the readers got some of the fun surf last Sunday. It was one of those rare summer surf days with a decent sized ground swell, clean conditions and all the waves one desired. Lots of smiles around town Monday. This coming Friday and Saturday are the last two days of our six day red snapper season in Atlantic waters. I got my one fish limit last Saturday with a 20 pounder and hope to repeat it again this weekend.

"Music was a lot better when ugly people were allowed to make it." ____Otis Gibbs

Back In the Saddle

 I'm back after a couple of weeks above and under water in the nearby paradise of the Abacos. It still blows my mind that the opportunity to put the only footprints on ten different beaches a day and to dive and swim in water as clear as air is just a little over an hour from here. If one's impression of the Bahamas is a cruise ship visit to Freeport or Nassau it's no more accurate than an impression of Cocoa Beach based on a visit to Ron Jons and the Pier.

 The final numbers for June were even more impressive than I last posted. There were 67 closed condos and townhomes in Cocoa Beach and Cape Canaveral in the month with a median price of $168,000 and 14 single family homes at a median price of $290,000.

The top 16 condo sales:

• The top floor (17th) NE corner Stonewood, fully furnished 3/2 with 2170 square feet and a two car garage for $580,000
• 3rd floor direct ocean Solana Shores 3/2 with 2095 square feet and a one car garage for $535,000
• A top floor direct ocean, fully furnished Meridian 3/2 with 2072 square feet and a one car garage for $717,500
• Remodeled 6th floor south facing SE corner C building Royale Towers 3/2 with 1860 square feet and a one car garage for $380,000. This one was taken out in first right of refusal.
• Nicely remodeled 8th floor NW corner 2100 Towers 2/2 with 1600 square feet and a one car garage for $350,000
• 5th floor direct ocean, two level Sunrise Tower 2/2 with 1457 square feet and a one car garage for $335,000
• 7th floor original condition, direct ocean Las Palmas 3/2 with 1500 square feet and a one car garage for $332,000
• 2nd floor corner, direct river Solana on the River 3/2 with 2187 square feet and a one car garage for $315,000
• Beautifully remodeled 3rd floor direct ocean Emerald Seas 2/2 with 1602 square feet and a one car garage for $310,000
• 2nd floor corner Solana Lake 3/2 with 1956 square feet and a one car garage for $300,000
• 4th floor corner Bayport 3/2 with 2092 square feet and a one car garage for $297,500
• Non-oceanfront Shorewood corner 3/2 with 1992 square feet and a one car garage for $290,000
• 5th floor Solana on the River 2/2 with 2055 square feet and a one car garage for $289,900
• Remodeled and furnished 10th floor direct ocean 2100 Towers 2/2 with 1200 square feet and a one car garage for $302,000
• 6th floor partially remodeled, bank-owned, direct ocean Stonewood 2/2 with 1317 square feet and a one car garage for $275,000
• Furnished, original condition, 2nd floor Royale Towers B building 2/2 with 1256 square feet and a one car garage for $274,900

Ten of the these units sold in less than 22 days on the market.

There are 281 condos and townhomes for sale on the MLS in our two cities with 15 of those yet to be built. Eight are short sales and 13 are bank-owned. There are 70 single family homes on the MLS. One is a short sale and four are bank-owned. Inventory is not sufficient to meet the demand so buyers can continue to expect to have competition for attractive listings. Feel free to contact me if you have questions or just want to bitch about some stupid comment or forecast I've made. I'm here for you.

"You can always count on Americans to do the right thing -- after they've tried everything else."  __Winston Churchill

Happy Independence Day 2014

I can't imagine that it will come as any surprise to anyone familiar with the Cocoa Beach real estate market that June 2014 was another record month for closed properties. Not quite as many closed sales as May but it was the busiest June for closed sales in Cocoa Beach and Cape Canaveral since June 2005 with 64 closed condos and townhomes and 13 single family homes. That is as reported by the often tardy listing agents in the Cocoa Beach MLS. The number will likely increase as the slacker contingent drags back to the office next week and updates their listings. To put that in perspective, almost a quarter of the total condo listings in our two cities sold last month and slightly less than a fifth of all single family listings. Conservatively speaking, demand is far exceeding supply and the imbalance looks to continue. I will detail specific sales in a follow up post.

Hope everyone is enjoying the long holiday weekend and operating outside the stupid zone. Party defensively and point your fireworks down range.

“Happy 4th America. I love ya, ya old coot. Have fun mixing liquor and fireworks today and don’t forget to STOP DROP AND ROLL!”  ____Jim Carrey

Welcome To Summer

The tally on closed condo sales for last month in Cocoa Beach and Cape Canaveral wound up at 73 units according to the Cocoa Beach MLS. That total ties with last July as the most condo sales in nine years. That's a big deal. Back in June 2005, the last time we had more closed sales in a month, there was three times the inventory for sale and mortgage qualification was still in the "need only fog a mirror" level of scrutiny. In June 2005 four out of five condo sales were financed. In May 2014 only one third of the condos and townhouses sold were financed. In 2005 condos were selling for a huge premium to today's prices, some for more than twice today's price. Those crazy prices began retreating in late 2006 for most buildings and, after bottoming a couple of years ago, are inching their way upward in most complexes.

A few examples:

•  In June 2005 a Cape Winds 4th floor 2/2 closed for $413,000. A similar condition 2nd floor unit recently closed for $220,000.
• Windjammer 3rd floor 2/2 sold for $450,000. Two units are available today asking below $300,000.
• 5th floor Stonewood 2/2 sold for $495,000. A 16th floor same floor plan unit sold recently for $275,000
• A 5th floor partially remodeled Stonewood Sand Dollar 2/2 closed back then for $530,000. An exquisitely remodeled 5th floor Sand Dollar just closed for $384,700.

Those of you hoping to buy have a much reduced supply of units to pick through. Don't despair. Prices aren't running away and we are getting just enough new listings to handle the demand. There are 262 existing units currently for sale in our two cities with right around 100 in ocean complexes. Know what you're looking for and be realistic with expectations for price. You're not going to have to pay anywhere near 2005 or even 2010 prices but don't expect to pay less than the last similar unit. It pays to discuss recent sales of similar properties with your agent so you'll be able to recognize a fair deal when one presents itself. As always, if planning to get a mortgage, talk to your LOCAL lender before you start the process. Know what's going to be required for a down payment and don't waste your time looking in complexes that won't qualify. That cute little Cape Winds unit may be perfect for you but Roger at First Muskellunge National might not realize that there is no secondary market for condo-tels until days before closing. He'll apologize but he won't be able to close. A local lender would know that your hopes for a 20% down mortgage on that unit are not likely to happen. He might offer alternative financing solutions before letting you waste money on appraisal and inspections. Your buyer's agent, if she knows her stuff, will be able to tell you which complexes won't or might not qualify and can save you wasted time. If she can't, pink slip.

"I've learned that self-interest is the most powerful force in the world. People in unethical, predatory, and nonsense jobs will do mental gymnastics to convince themselves they're doing the right thing. Those who criticize the behavior of  "greedy Wall Street bankers" underestimate their tendency to do the same thing if offered an eight-figure salary."  ___Morgan House

Are You a Tax Evader?

Unless you have a written lease for longer than six months, when you rent your Florida property you are required to collect 6% tax for the State of Florida and the appropriate tax for the county, 5% here in Brevard County. That tax must be remitted with the tax returns by the 20th of every month to both the State and the County. The State has employees who regularly cruise the vacation rental websites like VRBO and Homeaway looking for owners whose properties are being offered for periods of less than six months. If you'd like to come into compliance before you get the nasty letter or phone call, visit MyFlorida.com for state license application and sales tax number. You'll also need to check with your county (Brevard County info here) and city to make sure you're in compliance with everyone. Here is the form for Cocoa Beach. It's a pain in the butt but it's the law.

Locals with kayaks and the knowledge have been catching giant tarpon and monster jacks off the beach in the calm conditions of the last few weeks. A hundred pound plus silver king out of a kayak is an experience not soon forgotten.

The End of the World as We Know It

The ground that the US real estate industry is planted upon has begun to shift. The tremors we've been experiencing in the online world of real estate seem to predict a major event sooner rather than later.

Just a few years ago, Realtor.com was the number one website that consumers used to search for real estate. Most MLS systems including ours share their listings with Realtor.com. Not long ago the Brevard MLS began sharing listings with several other websites with the thinking that more exposure was better. These outside sites, Trulia, Zillow, Homes.com among others, took our listings (freely given by us, BTW) and presented them on their websites that were usually more user-friendly than the clunky consumer side of our MLS. They built traffic and popularity quickly. Zillow cleverly created an automatic estimate of value of all properties, the Zestimate. It has been notorious for inaccuracy and Zillow has admitted as much. However, the inaccuracy, whether intentional or accidental, has been a brilliant viral tool as it is one of the most discussed topics on practically every online real estate forum. Zillow is now firmly in the number one spot as the highest trafficked real estate website and is getting twice the monthly visitors of Realtor.com.

Once they gained traction and traffic these websites began selling advertising back to the very agents whose listings made up the content of the site. For a fee, any agent, listing or otherwise, can have their smiling Glamour Shot placed in the margin next to listings that consumers view. Consumers can also search for agents and read reviews supposedly from past clients. Agents have to sign up (for free) to show up in the list of agents. Once signed up for free the sales reps begin repeatedly calling to sell upgraded placement. One agent told me that a sales rep at one of the sites told him that they would remove any bad reviews if he signed up.

Let's test the agent search on one of the sites I mentioned. Searching for an agent in Cocoa Beach I get 492 results. Holy cow! That's like 4% of the population of Cocoa Beach. Nine of the thirteen agents listed on page one of the results work out of offices in cities other than Cocoa Beach or Cape Canaveral. I have never been involved in a transaction with nor even heard of any of those nine agents. [Note: When choosing an agent online, it makes sense to make sure they actually work in the market they are claiming to service. Big red flag is an office in another city.] Guess who isn't among the 492 Cocoa Beach agents? Yep. Yours truly. Representing hundreds of buyers in Cocoa Beach over many years is not enough to show up in a list of Cocoa Beach agents because Homey won't play their game and do the "free" sign-up. It doesn't really matter because very soon the agent advertising revenue will become inconsequential to these sites.

Now that they have the traffic, there appears to be a much more lucrative business model looming. It will be a simple shift to offer listings directly to home sellers who aren't listed with a local real estate broker. I can see the local MLS quickly becoming irrelevant if all listings (including non-MLS-listed properties) can be found on another easier to use website. Why would a home seller pay a real estate broker thousands to market and sell their home if they can get adequate exposure and an acceptable selling price elsewhere for a few hundred bucks or even "free"? We are currently in the transition. At the moment, as a seller, I couldn't be sure I'd be getting exposure to all buyers by only being offered on a non-MLS website. I might leave money on the table without exposure to all potential buyers. Certainly most buyers are looking for property online, but no one can be sure which website they are searching ... yet. That is changing and the eventual 800 pound gorilla may just be an under-the-radar chimp charging in from left field.

A couple of years ago Nationstar Mortgage began running some of it's short sales through auction.com prior to negotiating the short sale. After receiving a short sale package from a seller's agent, they would require the owner of the property to turn over the listing to auction.com or their short sale would be refused. If a bid above the short sale contract price was received at auction Nationstar would accept that one instead of the original contract. The buyer would pay a 5% premium on top of the winning bid and would be allowed no financing nor inspection contingencies. This turned out to be a lucrative venture for Nationstar and they recently acquired Homesearch.com for $18 million and began running their short sales through auction there. Their sights are on much loftier goals than short sale auctions and they may eclipse the Zillows and Trulias of the world and transform real estate in the process.

About the acquisition, Nationstar CEO Jay Bray said,

“Today, real estate search engines allow you to search for homes, find the estimated property value of your home, and somewhat realistically, those of your neighbors. However, these search engines are not currently designed to allow consumers to transact, and lack a comprehensive fee-based business model. In short, their value is generally limited to real estate catalogs supported by advertising.”

By contrast, Nationstar envisions that consumers and real estate agents who come to its site will be able to list their properties, manage them, sell them, buy them, and look for “downstream” mortgage, title, appraisal and closing services. Annually, there are 8 million real estate transactions in the United States, 5 million home transactions and 3 million refinancings. Our macro goal is to capture a fee component of as many U.S. real estate transactions as possible while increasing profitability,” Bray said.

Once they iron out the wrinkles using their own substantial inventory of short sales, I can see them offering the auction process to the public for a small fee. Probable scenario is: The property sellers specify a reserve price so they don't sell for less than the price they want but specify a starting bid substantially below the reserve. The buyer pays the website a 5% premium and hires a local agent to view properties, handle inspections, review paperwork, etc. He could choose that agent from a list of agents on the site. Since those 492 Cocoa Beach agents no longer have listings Homesearch would let them advertise bids for various services and busy work while scraping a small fee off the top. A couple hundred bucks to unlock a property and review a contract is better than nothing. In addition, the website would sell advertising or paid referrals to title companies, lenders and inspectors. One stop shopping and the blazer-clad Glamour Shots are free to join their travel agent brethren over a frosty brew at the Beach Shack discussing how video killed the radio star.

This is not crazy speculation. It's happening right now and the MLS systems are scrambling trying to put the horse (the listings) back in the barn. Our own association is among those embroiled in a fierce debate over the subject. I fear it may be too late. One bright spot is that when the traditional real estate model succumbs I will find myself in the best little beach town in Florida concerned more with wind and tide than inept listing agents and first right of refusal. There are worse things.

I hope everyone got a piece of the small longboard perfection yesterday morning. It was a classic summer Cocoa Beach day.

"If you do not change direction, you may end up where you're heading."  ___Lao Tzu