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

Accidental Landlords

I believe that sometimes you have to look reality in the eye and deny it. -Garrison Keillor

Accidental landlords. These are those property owners who, for whatever reason, could not or would not drop their asking price to a level that generated a deal and decided to rent their property rather than adapt to the market's reality. As market dynamics have deteriorated, the ranks of accidental landlords have swelled. Ironically, the decision to rent a property that won't sell many times winds up costing more than dropping the price earlier would have. With hundreds of properties for sale, the hassle of showing a tenant-occupied property often means that another easier-to-show property will get the showing. Add to that the fact that tenant-occupied properties usually don't show well and you've got a difficult, if not impossible, property to sell all the while risking further price deterioration, tenant damage and ongoing carrying costs. To add insult to injury, a property with a mortgage often has higher monthly costs than the rent it will command. My advice to sellers who have considered renting, crossing their fingers and praying for a miracle rather than dropping your price; think seriously about the real costs of doing that and the risks involved.

The pessimist complains about the wind; The optimist expects it to change; And the realist adjusts the sails.
-William Arthur Ward

Gimme Shelter

Thoreau said, "On tops of mountains, as everywhere to hopeful souls, it is always morning." From this hopeful soul, here is a beautiful morning last week in south Cocoa Beach.



One month into the new year and, as expected, activity has picked up even though January's closed sales are down over 50% from our peak year of activity, 2005. We have had a total of 23 closed MLS sales of condos in Cocoa Beach and Cape Canaveral. There were 6 single-family sales in the month with only one over $500,000. Three of the condo sales were in oceanfront, short-term rental buildings. That particular area of our market is getting a lot of attention as prices have now retreated to the point that income levels start to make them attractive. When you can get into a unit with $2000 of monthly costs including mortgage payment that rents for $900 per week, cash flow becomes possible. It's then all about occupancy levels. Prices of side-ocean view units have dropped from the $300,000+ range to the $260,000 neighborhood.

Prices of closed condos in January were all over the map with an 1804 sq.ft. Crescent Beach Club top floor unit closing for $350,000 within days of a top floor 2678 sq.ft. unit next door at Casa Playa closing for $600,000. Side ocean view 2/2 units at Spanish Main and Chateau went for $260,000 and $255,000 respectively while a bank owned direct ocean 2/2 Cape Winds unit sold for $265,000. A brand new 1864 sq.ft. Puerto del Rio was purchased for $235,000. A quick-draw party pooper stole a 6 year old Solana Lakes 2/2, 1698 sq.ft. fully furnished unit for $195,100. The neighbors are probably less than thrilled with that especially considering that 2 identical units closed one year ago for $300,000 each. In 2005 these units peaked at over $400,000.

MLS inventory Cocoa Beach/Cape Canaveral Feb. 3, 2008

condominiums______866
single family homes__135

Weather for the last week has been in the 80s with light winds and a persistent chest high swell that has made at least one realtor very happy. Our sandbars have returned to old-time Cocoa Beach shape making for long, fun waves and the water has warmed back up enough to retire the wetsuit for another year. For fishermen, the good news is that schools of pogies are showing up just off the beach which means the spring run of cobia can't be far behind. Further offshore, dolphin, wahoo and bottom fish like grouper and snapper have been chewing hard and it promises to get better as the weather continues to warm. It's a great time to be a Cocoa Beachling, or should that be Beachonian, ... Beachite? Whatever, it's a good time.

All life is an experiment. The more experiments you make, the better.
Ralph Waldo Emerson

January's Deals and Steals

What a crazy market it's been so far in 2008. Oceanfront steals have been sparse with most of the jaw-dropping price action happening in riverfront condos and single-family homes. The most outstanding oceanfront deal so far in 2008 was a top floor Crescent Beach Club 3/2 with 1804 sq.ft. and views of both the ocean and across the Banana River to Merritt Island. Closed for $350,000.

The ever-popular Diplomat non-ocean 2/1 units have retreated to $125,000 and $130,000 respectively for the two closed sales so far this year. There were three sales of these units in 2005 for over $200,000.

A 4th floor 2/2 direct river Four Seasons closed this month for $220,000. That's $167 per square foot for a great river view in a well-maintained complex with a private garage.

A top floor 2/2, side ocean view at Chateau by the Sea closed for $255,000. These units fetch $800-$1000 per week in season and $600-$700 weekly off-season.

As I search the MLS this morning, there are remarkably few aggressively priced direct ocean units offered. I can find several deals in direct river units, however. A sampling would include a top floor over-sized 2/2 Harbor Isles overlooking the Thousand Islands for $269,000 with this view.


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A side view River Lakes 2/2 for $250,000 with this view. Boat slip available for no extra charge.


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A Pebble Cove ground floor direct river 3/2 for $189,000. This one was listed for $275,000 just one year ago.

Last is a 1351 sq.ft., 2/2 Rock Pointe direct river for $179,800 with garage. Needs some updating.

If you hope to pick up a property at a good price, be aware that you'll be competing with vulture investors who are actively scooping up attractive deals as they happen. They are playing hard ball with offers but, in most cases, are offering cash and a fast closing with no contingencies. As I've stated before, you better be able to support your offer with facts. Just offering 20% below the asking price and hoping for acceptance will not get the job done. Keep up with what's happening in our market so you'll know a deal when you see it. I'm still seeing sales close significantly below asking price that are not great deals. It makes more sense to pay full asking price for a $200,000 aggressively-priced listing than getting a 20% discount on a similar unit offered for $275,000. Knowledge is power. Do your homework.

MLS inventory Cocoa Beach/Cape Canaveral Jan. 27, 2008

Condominiums______875
Single family homes__127

Secret Agenda - Revisited

I first commented on the issue of agent bonuses back in Feb. 2006 and again in November of that same year. I'm revisiting that subject because of a conversation I had yesterday with another agent concerning agent incentives. In case you missed those two posts here they are.

[Nov. 2006]
Looks like someone else has been investigating the whole buyer's agent compensation issue. The Wall Street Journal published an article this week by writers, James R. Hagerty and Ruth Simon, entitled "Do Real-Estate Agents Have a Secret Agenda?"

It was like deja vu all over again. If you've been reading this blog for a while, you may remember my post on Feb. 26 of this year entitled "Conflict of Interest". In it I raised the same concerns that these writers addressed in their piece, sellers trying to subvert the process by offering sweet temptations. Rather than rehash the whole issue, I've repeated the post below. I'm not saying all bonuses are undeserved, but, I do think that buyers should be made aware of extra compensation intended to attract the buyer's agents. If your agent goes above and beyond the call of duty, she may deserve every penny being offered. If it was an easy deal for her, she may be happy to rebate that bonus to you. Knowledge is power.

[Feb. 2006]
I've been thinking about agent bonuses and commissions for quite a while. As our market has slowed, we are seeing sellers offering higher commissions and bonuses, supposedly to get agents to push their properties. I received a postcard this week from a developer offering not only 3% commission but also a $1000 bonus to any agent bringing a performing buyer. (note from 2008: As the market has evolved since those posts, bonuses have gotten bigger, as much as 10% commission and bonuses as high as $50,000.) This is troubling to me. It suggests to me that the seller offering the bonus thinks that I would steer my buyer to their property because I would make more money. Folks, if your agents are selecting properties to show you based on the amount of money that they will make, they need their butts kicked. This whole idea of paying a bonus to the selling agent seems to me to be a serious conflict of interest and an incentive to engage in unethical behavior. Without asking, a buyer may never know which properties are more lucrative for their agent, or, if they are even being shown all properties. As it stands, bonuses are legal and commonly offered. I'll go on record as saying the practice has a foul odor to me.

Poof! Half million dollars, gone.

Yesterday's hotsheet revealed a remarkable new listing that qualifies for smoking deal of the moment. The house (pictured above) is 4130 sq.ft., 4 bedrooms, 3 baths with pool and dock room for multiple boats on 90' of open Banana River. Last sold in 2005 for $1,000,000 and listed yesterday by the bank after foreclosure for $534,900. I don't expect this one to last very long.

[update Jan. 17] I inspected the house above this morning and a more clear picture emerges. The photo above was taken some time ago as the pool is now dark green and full of algae. There is no flooring in many of the rooms, damaged sheetrock from a leaky roof, visible mold and other issues. It may still represent a great deal at this price but it is going to require quite a bit of work to restore it to livable condition. Click here to see a slideshow of photos from this morning.

[update Jan. 18] The house is under contract as of today.

Next deal today is a 2nd floor 2/2 in a small riverfront complex in south Cocoa Beach across the street from the beach. Views from the big screened balcony are across the wide part of the Banana River to Merritt Island along a beautiful shoreline (pictured below). This one comes with a deeded boat slip on the open river and is listed for $245,000. Last 2/2 unit sold in this complex this year went for $272,000 without the boat slip.



Last of today's deals is a 4th floor direct Harbor Isles, over-sized 2/2 with amazing views across the Thousand Islands for $269,000. This will break new ground in this complex as the last sale of a 2/2 direct river was for $330,000. No photos of this unit.

Email me if you'd like to receive notices of these deals as they surface.