MLS stats for Nov. 15, 2005

No commentary today, just hard facts. Buyers, your time is now.
Record high inventory, record slow sales.

MLS Stats for Nov. 15, 2005

contracts last 14 days

condos over $500,000____ 2
condos under $500,000__ 12

homes over $500,000____ 1
homes under $500,000___ 1

active listings

condos all prices_______621
condos over $500,000__ 165

homes all prices_______ 79
homes over $500,000__ 41

Another milestone

After passing the milestone of 500 active condo listings in Cocoa Beach and Cape Canaveral in September of this year, we broke through 600 this week, less than 2 months later, at the same time that the rate of sales hit it's yearly low. What this means for buyers is bargaining strength and plenty of choices. For sellers it's a reality check. The days of multiple, over-asking-price offers are over, at least in the short term. I still see plenty of optimistically-priced properties but we are starting to see sellers come to terms with the changed market and set their prices accordingly. If you're looking to purchase in our area, this is your best opportunity in years. I expect an increase in activity in January as our snowbirds arrive (at a less frenzied pace than the last few seasons), so, your chances of hammering out your best deal will be before that time. Email me for a list of my favorite deals of the moment.

Mortgage rates, taxes and a slowed market

Here's a new listing from another office this week. Direct river, 2/2, 2nd floor condo with views across the wide part of the Banana River. The ocean is just across the street. Somewhat over-priced at an asking price of $370,000, furnished, but if the seller will get realistic this is an impressive unit in my favorite part of Cocoa Beach. Here's the view from the living room.



Freddie Mac reported this week that mortgage rates are at the highest point in 18 months with an eighth consecutive weekly increase. Will rising rates kill the real estate market? Maybe not. Consider the fact that new mortgage products introduced in recent years have multiplied the pool of qualified buyers by a factor of 2 or 3 according to lenders. With products such as no-doc and stated-income loans, buyers that couldn't otherwise find financing can now qualify for loans. Also consider that as rates move up, stretched buyers have alternatives to conventional 30 year fixed rate mortgages with products such as interest-only, 40 year, and other loans that offer lower payments. I not suggesting that buyers use these products, just that the impact of rising rates may be less this time than in previous periods of rising rates.

Property taxes. I am often asked by buyers what the property taxes are for a property. Unknown to many is the fact that the amount of tax the current owner is paying is not relevant to what a new owner will pay. Any change in ownership will trigger a new assessment based on current value. Many homesteaded properties have assessed values that are far below actual current value. In Florida homesteaded properties receive a $25,0000 reduction in the assessed value and, more importantly, the assessed value annual increase is capped to the lesser of 3% or the CPI. In the last ten years the CPI has been less than 3% eight times. What this means is that the $500,000 home you're considering may be on the tax roles for less than $100,000 with a current tax bill of less than $1000 annually. The purchaser of that property will probably be looking at a substantial increase in his taxes by the second year after purchase. To figure your possible tax liability on a new purchase you can go to the Brevard County Tax Appraiser's website and use the handy auto-calculator there or, for ballpark estimates, use my rule-of-thumb of 1.6% of the purchase price. This is for easy projections only. Your actual tax bill may be more or less but it's close most of the time.

Here are the stats for the last two weeks. As you can see, sales have slowed even more and inventory is climbing rapidly. If you're thinking of purchasing, you have much more negotiating strength now than you'll have after the holidays when our winter visitors arrive.


MLS Stats for Nov. 2, 2005

contracts last 14 days

condos over $500,000____ 3
condos under $500,000___ 6

homes over $500,000____ 2
homes under $500,000___ 1

active listings

condos all prices_______588
condos over $500,000__ 157

homes all prices_______ 65
homes over $500,000__ 41

Hurricane Impact on Prices

Is it possible for a hurricane to impact the value of property that was physically undamaged? In Louisiana and neighboring states after Hurricane Katrina, undamaged property, both commercial and residential, saw immediate increased demand and prices as people and businesses were forced to relocate. Another less obvious effect post-hurricane is the increase in the prices of building materials and labor. Florida builders have reported price increases in plywood and OSB sheeting ranging from 30 to 50% since the first of September. Asphalt shingles have been increasing steadily at around 5% per month with manufacturers struggling to keep up with demand and actually rationing some suppliers. Before the storms we were seeing cement costs rising about 20% every 6 months and similar moves in sheetrock. In addition to these rapidly rising costs, much of the construction labor force has shifted to the Katrina devastated areas. This has contributed to increased labor costs for Florida builders. How does this impact existing property value? It increases the costs to replace and the costs to build new competing properties. This increase has not shown up yet in the prices of MLS listed properties as we are in the middle of the seasonal slow season and we're on the heels of a big run-up in prices. However, the economic reality is that it must trickle down to asking prices at some point. I think this is bullish for existing Florida property values. As always, these are my own opinions based on reported facts and lots of creative thinking. Email me if you'd like to share your own thoughts. larry@southcocoabeach.com

Change of sentiment

It's been a while since my last update. I thought, considering the slow state of the market, that I'd take the opportunity to get away with my wife, Kim, and spend a little time in the mountains of North Carolina. My trip was eye-opening for me. The pace of construction across the south seems as strong as it is here in Florida. In fact, after looking at prices and paces of other markets, I have changed my opinion on the near future trend of our Cocoa Beach market. Even with 30 year fixed-rate mortgages back up over 6% and increasing supply in our local market, I think that now is a great time to add properties to your portfolio. That is, carefully-selected properties.

As you can see from our stats below, our condo inventory is steadily increasing with a lot of new properties in the high end. Because of the slow season, it's taking longer to move units and buyers are in a powerful bargaining position. Consider a new listing from another office this morning;


View at River Lakes

1244 sq. ft. unit for $299,000 in River Lakes on the Banana River with boat slips available on request. I own a unit in this great complex that had zero damage during last year's storms and has healthy reserves and is 2 blocks from the ocean. This is exactly the type of investment property that I think makes sense right now. I'm still very bearish on pre-construction condos in the high end because of the over-supply. We are already seeing desperate sellers in a few of the luxury projects that are nearing closing and I suspect that there will be some very attractive deals in the coming months. If you'd like a list of my favorite current targets, email me at larry@southcocoabeach.com or call me at 321.917.5786. Until next time, be safe and get out and enjoy this great October weather before Hurricane Wilma interrupts.

MLS Stats for Oct. 20, 2005

contracts last 14 days

condos over $500,000____ 4
condos under $500,000__ 12

homes over $500,000____ 3
homes under $500,000___ 2

active listings

condos all prices_______558
condos over $500,000__ 156

homes all prices_______ 63
homes over $500,000__ 38

The lazy days of September

Things are quiet in Cocoa Beach this time of year. The students are back in class and our winter visitors won't arrive for a few months. The water is still warm, we've had great surf for weeks, the fall mullet run is on, the fish are biting and you can play 18 holes with a cart at the Cocoa Beach Country Club for a paltry $24.



These are just a few of the reasons why I love Cocoa Beach and why September and October are my favorite months of the year.

Our market is quiet as well. In the last 14 days we have had only 25 residential properties contracted in Cocoa Beach and Cape Canaveral. That is our slowest rate of the year by a good margin. Our inventory has reached a new record level as well. We have crossed the 500 level in MLS-listed condos with 150 of those priced over a half million dollars.


MLS Stats for Sept. 25, 2005

contracts last 14 days

condos over $500,000____ 4
condos under $500,000__ 18

homes over $500,000____ 1
homes under $500,000___ 2

active listings

condos all prices_______507
condos over $500,000__ 150

homes all prices_______ 62
homes over $500,000__ 37

If you'd like to take advantage of the slow season in your property search, email me at larry@southcocoabeach.com or give me a call at 321.917.5786. Now, step away from the computer and go outside and enjoy the best time of the year. See you in or on the water.

Irrational Exuberance with a twist

Irrational exuberance. Those famous words were uttered by Federal Reserve chairman, Alan Greenspan, during a speech on December 6, 1996 in reference to soaring stock prices. Here is the entire speech for those of you so inclined.

Irrational exuberance is alive and well in our local real estate market but not where one would expect. In the red-hot real estate market of the last 5 years, there has been plenty of justified exuberance as values have skyrocketed. We have seen some property values double in less than two years. The fortunate property owners during this period have every right to be exuberant. The local newspaper has printed countless articles about high appreciation rates and increasing home prices. Buyers have been very aggressive in accumulating properties in order to participate in this unparalleled boom and prices have continued to climb, at least until now. It has become evident in my market, Cocoa Beach and Cape Canaveral, that the pace has slowed considerably. Buyers have become fewer and more cautious. The sellers, on the other hand, are being much slower to come to terms with the slowed market. I continue to see over-priced new listings and increasing inventory of homes and condos. The unwillingness of sellers to adjust their asking price to the new slowed demand has brought us to a teetering point. It can go either way. The buyers can regain their previous zeal for properties and resume paying ever-increasing prices or sellers can get aggressive and reduce prices to attract reticent buyers. My gut feel is that the irrational exuberance today is that of the unbending sellers, clinging to the hope of ever-rising values. As always, I could be wrong. I have demonstrated that capacity in the past. In any event, I believe that buyers should negotiate aggressively and use this softening to their advantage. Good luck out there. Do your homework and don't overpay.

Between Storms

An interesting thing happened this past week. Buying activity picked up significantly after being pretty much flat for weeks. We have seen 5 houses over $500,000 go under contract in just the last 7 days. I can't say for sure what spurred this burst of activity but the expected easing of Fed policy in response to the Katrina damage and the projected, prolonged low interest rate scenario could have eased some fears of a cooling market. Maybe buyers are realizing that whatever happens to the housing market in general, if you want a place in Cocoa Beach, now is better than later. We are seeing a still-increasing supply of homes and condos on the market but activity has picked up in a normally slow time of year.


MLS Stats for Sept. 10, 2005

contracts last 14 days

condos over $500,000____ 5
condos under $500,000__ 40

homes over $500,000____ 6
homes under $500,000___ 0

active listings

condos all prices_______455
condos over $500,000__ 134

homes all prices_______ 64
homes over $500,000__ 37

I received the pre-construction pricing for the Magnolia Bay third building this week. Ten percent down and a ten percent note held by the developer. One building left to be released. Expected completion, late 2006. If you'd like to receive the price list, email me. As always, be careful in your negotiations and do your homework. I'm off to catch the last of the Hurricane Ophelia swell.