Shifting dynamics

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June property sales in Cocoa Beach and Cape Canaveral began to taper off from the above-average pace of the last year and a half. It was not completely unexpected considering the drastic reduction in inventory in recent months. There were 14 sales of MLS-listed single family homes in June, 12 in Cocoa Beach and 2 in Cape Canaveral. Prices ranged from a high of $480,000 for a three year old 3472 square foot home at Enclave of Cocoa Beach to a low of $60,000 for a small (1209 square feet) frame house in Cape Canaveral.

There were 36 sales of MLS-listed condos and townhomes in June compared to 49 sales in May and 44 in June 2010. Both the lowest and highest sales were foreclosures, $25,000 for a one bedroom Surf n Sun, one block from the ocean in Cocoa Beach and $975,000 for a swank 5152 square foot direct ocean penthouse at Ocean Oasis in downtown Cocoa Beach. Only three condo sales exceeded $255,000 and half were for less than $115,000. Distressed sales made up exactly 25% of the total with four foreclosures and five short sales. Other than the foreclosed Ocean Oasis mentioned above and a Meridian short sale that closed for $615,000, none of the distressed sales exceeded $129,000. Only 8 of the 36 condo purchasers used a mortgage, 78% paid with cash.

Inventory is down to 367 total condos and townhomes this morning in Cocoa Beach and Cape Canaveral. Eleven of those are foreclosures and 47 are short sales which means 16% of the total inventory is distressed. This percentage has retreated significantly in just a few months.

The cobia made a surprise reappearance last Sunday when my fishing partner and I caught eight fish, kept two in the 40 pound range and saw around 70 to 100 fish. They were in 15' to 25' of water on a shoal about five miles offshore and north of the Cape. Good fun and good eating.

"If there's anything that upsets me, it's having people say I'm sensitive." ___Barney Fife

Make $3000 a month doing nothing

Beautiful south Cocoa Beach sunrise July 2, 2011.

Rent a beautifully furnished, 3 year old direct ocean penthouse for $2500 per month. The owner purchased this unit in 2008 for high $700,000s and put down $147,000 plus closing costs. He furnished the unit with expensive furniture and accessories. It is now offered as a rental for $2500 per month or about $3000 a month less than the actual cost to the landlord (mortgage, taxes, condo fee and insurance). Alternate post title: "How to make a small fortune - start with a larger fortune."

“My personal belief is that Enron stock is an incredible bargain at current prices, and we will look back a couple of years from now and see the great opportunity that we currently have.” __Ken Lay

Meet the buyers [updated]

Got a link to an interesting story from Brian B. (thanks) about the new middle and upper class Chinese buying investment properties outside China. While I haven't seen any Chinese buyers here in our market I thought I'd do some digging on the geographic breakdown of recent purchasers in our market. Results were not what I expected. Out of the last 150 condo purchases in Cocoa Beach and Cape Canaveral 38 units or 25% were for primary residences. (This is assuming that those who listed the same mailing address for tax purposes are intending to live there.) Next biggest group of purchasers were other Florida residents, primarily local and Orlando area. Of these, several were buying another unit in the complex where they already live. New York led the other states with 11 purchasers followed by Pennsylvania with 9. The rest were scattered across mainly eastern states with only 8 of the last 150 purchasers of Cocoa Beach and Cape Canaveral condos residing west of the Mississippi. The big shocker for me was the lack of Canadian and European buyers. Out of the last 150 only 5 were Canadian and we had 2 lonely Europeans.

[update] Of the 150 sales I researched above, 131 were MLS listed. In 73% of those 131 sales the buyers paid cash. Foreclosures made up 12% of the total and short sales 15%. There were 35 MLS single family home sales in the same period with 54% of those selling for cash.

Our numbers do not seem to support the trends we see reported for other areas of Florida, especially coastal south Florida. The big numbers of foreign buyers we hear about in the Miami/Ft. Lauderdale markets do not exist here, at least recently. The last 150 sales that I used for this study stretched from March 15 through June 6, the last posted sale as of today at the Property Appraiser's site.

I was offshore on Thursday this week and jumped overboard for a little snorkeling on the ledges north of the Cape in 35' to 55' of water. The water was clear enough that I could see the bottom from the surface in 40'. While the coral there is sparse, the amount of other life was amazing. Clouds of sardines were constantly cruising by followed closely by king mackerel while underneath them the bottom was alive with giant goliath groupers, mangrove snappers, sea bass, triggerfish and other cool stuff. Was my first time exploring underneath the hull up there but I'll be doing it again.

"A fanatic is one who can't change his mind and won't change the subject." _____Winston Churchill

Where it's at, direct ocean

I thought I'd dust off the abacus and do a rundown of recent direct ocean condo sales in Cocoa Beach and Cape Canaveral. Excluding side view and ground floor units, and including only units with at least two bedrooms and two baths, we are left with a mere 12 MLS-listed units closed since April 1.

Lowest priced sale was $225,000 for a 4th floor Wellington in downtown Cocoa Beach. It was a remodeled and fully furnished 2 bedroom, 2 bath with 1049 square feet and no garage. Highest price paid since April 1 was $975,000 for a massive 5152 square foot penthouse (7th floor) at Ocean Oasis also in downtown Cocoa Beach. This seven year old unit has 4 bedrooms, 4.5 baths and a 3 car garage. Top of the line everything. Seems like a deal when compared the the second highest sale, $865,000 for a 5th floor 3 year old Ocean Cove in south Cocoa Beach. While every bit as nice as the other unit, with 3 bedrooms, 3.5 baths and a 2 car garage it has 2758 square feet, just slightly more than half the size.

Others sold included units in Meridian, Xanadu, another Ocean Oasis, Michelina, Crescent Beach Club, Waters Edge, Royale Towers, Shorewood and La Mer. Highest price per square foot of the bunch was $314 for the Ocean Cove unit described above and the lowest was $154 per square foot for a top floor south corner Crescent Beach Club that was partially remodeled and in need of several new sliders. Average price per square foot paid for direct ocean condos with at least 2 bedrooms and 2 baths, above the ground floor and closed since April 1 was $202 and the median was $196.

For what it's worth, there were 13 units with the same criteria closed in the same period one year ago, April 1 through June 22, 2010. The average price per square foot then was $225 and the median was $236.

These averages are good to know whether you're buying or selling but are only one part of the picture. Don't get too hung up on the average if you've found a unit you like priced above the average number. With inventory of units at an all-time low, it might make sense to pay more than the average to get the unit you want. Likewise, if you've gotten an offer you think is too low based on the average, consider the cost of holding that property while waiting for another buyer willing to pay your hoped-for number.

Meanwhile, the sailfish have been thick just offshore with several boats catching and releasing multiple fish this past week. We've also seen some big dolphin and wahoo coming to the dock. Anglers in small boats and kayaks have been enjoying the flat conditions and playing with the giant tarpon and jacks around the bait pods just outside the surf line. If you head out, don't forget the sunscreen and water. It's been and still is extraordinarily hot.

"Cocoa Beach. How fab. You're so lucky." Jim Cramer responding to a recent Fast Money caller from Cocoa Beach

Things that make you go, "Huh?"

For your consideration, a few interesting new listings. Apparently denial is alive and prospering in the summer heat. At a small oceanfront building near the Pier we have two, both with 910 square feet and partially obstructed side ocean views from their tiny balconies; a 4th floor 2/2 asking $274,900 and a 3rd floor at $260,000. Last sales of side view units in this building over two years ago were at prices between $202,000 - $215,000. Two years later these new listings are asking over $100 per square foot more than recent sales of direct, east facing units in brand new buildings. These are in a 37 year old building in need of repair and have no garage. Weekly rentals are allowed but $300+ per square foot? Come on.

How about an original condition 31 year old Cape Canaveral 3rd floor direct ocean 2/2 condo with 1222 sq ft asking $350,000 or $286/sf? Wait, it has a garage and comes completely furnished with old furniture. Really?

How about a newer (1996) north side view 7th floor, 3 bedroom 2.5 bath unit with 2100 square feet asking $669,900. Before you spit out your coffee I'd like to remind you that it is fully furnished and has a 2 car garage. Surely that justifies $319/sf.

There are plenty of overpriced listings but some, like these, are so outrageous as to defy logic. If you want to sell, do your homework, know the market and price accordingly. The power of positive thinking is not going to make Sasquatch appear with a suitcase of cash ready to overpay for your condo. This post from 2009 still applies.

"I don't know whether I'd rather be shot as a crook or as an idiot." Mike Muckleroy speaking about Ken Lay's comment that he too had been hurt by Enron's demise as his net worth was down to less than $20,000,000.

Rare bipeds

MLS condo and townhome inventory June 7, 2011 in Cocoa Beach and Cape Canaveral is 389 units. There are 44 listings asking over $500,000. This year so far seven units have closed for more than that number so we have enough half-million dollar plus units to last a few years. Not so in the lower price ranges. There are 66 units asking less than $100,000. Since January 1, a total of 86 sub-$100K units have closed. That pool is getting skinny. Of the total 389 units for sale, 16% are distressed sales (13 bank-owned and 51 short sales).

Single family home inventory stands at 80 properties with 30 asking over $500,000. Since the first of January 60 properties have closed, 19 of those since April 1. Six of the 60 closing for over $500,000. Of the 80 currently for sale, 2 are bank-owned and 5 are short sales. New listings are appearing at a rate far below the sales rate.



I am anxiously awaiting new (fairly priced) inventory. Much of what supply we have is over-priced and has been sitting on the market for a long time, years in many cases. The severely over-priced listings can't be considered actual supply so our real inventory numbers are lower than the MLS total numbers of 389 condos and 80 homes. The appraisal prevents (in most cases these days) borrowing buyers from overpaying. Cash buyers aren't likewise constrained and represent hope for unrealistic sellers. Even though cash buyers make up three quarters of all recent condo purchasers, those willing to overpay are about as abundant as Sasquatch. Based on sellers' responses to many of the offers I present at least one has been spotted roaming the area. I've got news, folks. That's a fur suit.

All other things being equal, a home or condo is worth very close to what other similar properties are selling for now, not last year or the year before, right now. Closed sales are running at an average of 91% of asking price. If you want to sell, do your homework and price your property within striking range of what the comps tell you it's worth. If you want to purchase, same strategy. Know what it's worth and offer within striking range of that number. Wishful thinking has proven to be an ineffective strategy whether buying or selling. The comps are what they are. Gather them yourself or have your agent furnish them if you can get her to return your calls.

"The truth does not change according to our ability to stomach it." _____Flannery O'Connor (thanks PR)

Shrinkage

Will our incredible shrinking inventory reach some stable level soon? Who knows? The condo and townhouse inventory in Cocoa Beach and Cape Canaveral, after steadily declining for the last five years, lost another 20% in the first five months of 2011. At the same time, sales are at their highest level since 2006. That dynamic is unsustainable. We must either get a fresh supply of units or sales will have to fall off. We are sitting on an 8.5 month supply in all price ranges at the current sales rate.

The rate of distressed sales (foreclosures and short sales) peaked in 2010 at 58% of all condo sales and still made up 50% of all condo sales as recently as January this year. By April 2011 distressed sales were down to just 28% of closed sales and holding at that rate so far this month. In 2007 there wasn't a single distressed sale in our market and 85% of all sales involved a mortgage. By 2009 cash sales represented more than half of all condo sales and one year later in 2010, 65% of all condo sales were cash transactions. That number was up to 75% last month.

Conclusions: except for special situation buildings and complexes, the trends seem to suggest that prices are close to stabilization. That doesn't mean that the overpriced condo that Grumpy has had listed for years is going to be worth anything near his crazy asking price just that the pace of his paper losses may begin to abate. The reduced supply of distressed sales should also contribute to stabilization. The high rate of cash sales would seem to imply that higher mortgage rates, if they ever happen, will have minimal effect. National average 30 year fixed rate is at 4.6% this week although for many condominiums, no lender is willing to write a mortgage. As always, my take on the implications of the numbers could be totally wrong. I welcome any alternative readings of my tea leaves.

I had a jaw-dropper experience with a slacker listing agent this week. It was shocking enough that it deserves it's own post upon conclusion of the almost-torpedoed deal. As Steve R. is fond of saying, "The body always surfaces." In this case it surfaced in grand fashion. Stay tuned for the whole story.

Love bugs have disappeared, school's out, water's warm, dolphin are biting and the golf course is uncrowded. And on this Memorial Day weekend, many thanks and respect for all our service men and women and especially for those who made the greatest sacrifice. Salute.


"If some chart appears to have some “cycle” the question becomes is it “real” or just something your mind is overlaying on top of randomness. Only God knows for sure, but either you’ll make money, lose money, or watch from the sidelines." ___ Mike C

To see the summer sky

As we approach June, condo sales are ticking right along with 40 closed MLS-listed condos and townhomes so far in May in our two cities of Cocoa Beach and Cape Canaveral. So far, no sale has exceeded $365,000 (top floor SE corner Crescent Beach Club) but the previous concentration of activity in the sub-$100,000 range appears to be fizzling out as inventory in that price range is drying up. Of the forty closed sales so far, three were foreclosures and eight were short sales. Just under half of the sales were in oceanfront complexes. Average discount off the most recent asking price was 9%.

Single family home sales have been robust as well with nine closed so far, all in Cocoa Beach, none in Cape Canaveral. One was a short sale and two were foreclosures. Prices ranged from $417,500 for a 4/2 on a big canalfront lot on Country Club to $92,500 for a small fixer-upper in Cocoa Isles.

There are 110 units that have been contracted in 2011 that have not closed yet, 54 of those short sales. Condo and townhome inventory stands at 393 total units this morning, 44 of those asking over $500,000, all but one of those 44 units less than 11 years old. There are 70 units actively for sale asking less than $100,000 only five of which are less than 22 years old. There are 12 foreclosures in all price ranges and 53 short sales.

The super boat races were a big hit this past weekend with boats skipping along at 165 MPH just off the beach. While the water was being churned up nearshore, the dolphins were playing alongside fishermen several miles further east. The dolphin above was one of several who came to play surfing the bow wave of our boat on Saturday.

"I may not have the answer but I think I've got a plan." ___Jackson Browne (who played a great one-man show Sunday night in Melbourne)