Condos and Scallops

Somehow, even with the already-tiny and still-shrinking inventory, 62 MLS-listed condos and townhomes managed to close in the month of July. One of those was a short sale and seven were bank-owned. Of interest among the bank-owned units was a 2nd floor east facing Mystic Vistas corner 3/2 with 2059 square feet that sold for $327,000 in 26 days. A shocker was a 3rd floor east facing (behind the pool) Spanish Main 3/2 with only 1153 square feet and no garage (no fridge or washer/dryer either) that incited a bidding war and closed above asking for a remarkable $302,500. Even for a weekly rental unit, that price surprised me. That was not, however, the highest price per square foot paid for an ocean condo in the month. A furnished and partially remodeled ground floor direct ocean Sandcastles 2/2 with 1286 square feet and a garage closed for a jaw-dropping $380,000. That's $295 per square foot for a unit with no view.

Other sales of interest included;

A remodeled and furnished 2nd floor corner 2/2 direct ocean Windjammer in Cape Canaveral with 1196 square feet and a garage closed for $330,000 in 18 days on the market.

A partially furnished and remodeled 3rd floor direct ocean downtown Cocoa Beach Park Place 2/2 with 1316 square feet and a garage closed for $335,000.

An updated 7th floor direct ocean Stonewood Cocoa Beach 3/2 with 1588 square feet and a garage sold for $400,000.

An updated and fully furnished 2nd/3rd floor townhouse style Royal Mansion Cape Canaveral 2/2 with 1058 square feet and a peek of the ocean closed for $255,000. Open parking and weekly rentals.

A fully furnished mainly original condition 4th floor north ocean view Sandcastles Cocoa Beach 2/2, 1286 square feet and garage closed for $305,000. Weekly rentals permitted.

A one of a kind 7th floor penthouse direct ocean Ocean Pines downtown Cocoa Beach with 3 bedrooms, 4.5 baths and 2706 square feet closed for $628,750. Came with a private 2 car garage.

An updated wide floor plan 5th floor north ocean view Windrush Cocoa Beach 3/2 with 1852 square feet and a 2 car garage closed for $430,000 in 29 days.

A remodeled direct ocean Waters Edge south Cocoa Beach 1st floor (above garage) 3/2 with 1753 square feet and a garage closed for $364,750.

A 3rd floor south facing peek of ocean between the buildings Solana Shores 3/2 with 2095 square feet and a private garage closed for $400,000 after just 20 days on the market.

A 4th (top) floor direct Banana River River Bend south Cocoa Beach 3/2 with 2050 square feet and a garage closed for $370,000.

Right up the road in south Cocoa Beach a 4th floor corner direct river Garden by the Sea 3/3 with 2405 square feet and a 2 car garage closed for $424,000 after about four and a half years on the market and for about $200,000 less than the initial asking price in 2010.

I'm happy to send a link to details of all 62 closed sales to anyone who would like it. As we can see from the recently closed sales, prices continue to rise, mainly a function of the record low supply, standing at 175 units for sale in Cocoa Beach and Cape Canaveral this morning with only seven distressed listings in the bunch. Having said that, we are still far below the prices of ten years ago and remain the lowest priced oceanfront community in Florida. 

The rain continues although nothing like the Biblical rains being endured on the central Gulf Coast of Florida. Scalloping there has been limited to between the storms but we were able to score good quantities on our annual harvesting trip this week. Spicy scallop baskets (gunkan maki) like those pictured will be gracing our plates for a few days.

Got questions? Email me. CBLarry@outlook.com

"When I was poor and I complained about inequality people said I was bitter, now I'm rich and I complain about inequality they say I'm a hypocrite". ____Russell Brand

Headlines < Statistics < Truth

I noticed a couple of interesting headlines in my morning coffee briefing yesterday, "U.S. Home Prices at Record High, Surpasses 2006 Market Peak" in the World Property Journal and "The Housing Market Still Isn’t Rational" by Robert Shiller in the New York Times. The first article's headline comes from NAR's most recent press release stating that the $236,400 median price for all property types nationwide in June exceeded the previous peak set in July 2006. A reader is left with the impression that property prices have returned and passed their bubble peak. Shiller's headline adds fuel to the fire although he opines that the lack of short sellers is what makes the housing market irrational. Huh? That is beyond my training in irrelevant cognition so I'll let it go other than to contest the inflammatory headline.

As we saw with the misreported property tax increase last week, the media is massaging the stats to create sensationalist headlines more intended to snare readers than report the truth. There may be areas or neighborhoods somewhere than actually conform to the median numbers. There may not be.

Consider a town with six sales in June: 4 homes @ $100,000 and 2 homes @ $1,000,000. The median is $100,000. If July sees just one of the $100,000 sales replaced with a $300,000 sale, the median will have doubled to $200,000. The market is essentially unchanged. The $100,000 and $1,000,000 homes are still selling at the same price but the one anomalous $300,000 sale doubled the median price. The median figure is completely irrelevant for buyers and sellers of the cookie cutter properties.

OK, we've established that the median is unreliable as an indicator of the change in home values. Where are prices in our market compared to the peak years. I pulled sales of direct ocean condos in Cocoa Beach in July 2005 and July 2015 for my comparison. I used the top seven highest priced direct ocean sales in each year. The median (and the average) of the seven sold units is about $85,000 (or 33%) less in 2015 than ten years earlier. Since the median and the average aren't good measures of individual property movements, I looked at sold price per square foot. Measure once, cut twice. Measure twice, cut once.

Based on the seven highest price closed sales in each year, the average dollar per square foot being paid in July 2005 for direct ocean condos was $322. How about right now, July 2015? Our average is $214 per square foot or about 2/3 of the 2005 price. The highest price paid this month was $254 per square foot, just $2 more than the lowest price paid in 2005. Trends in single family homes are similar. [Note that condition matters. Remodeled units sold for more than the average while original condition units sold for less in most cases. Use these numbers as guidelines not gospel.]

Takeaway: We are still about two thirds the prices of 2005 and in some cases half the peak prices of 2006. It is a reasonable expectation that prices will continue upwards from here barring a black swan. National median home prices or the sales rate or any other data as reported by NAR or the local Board of Realtors is of zero value for participants in the Cocoa Beach and Cape Canaveral market. Averages and medians make for good headlines but, except by accident, don't apply to the vast majority of buyers and sellers. Those of you buying or selling property in our area can easily get a good idea of the value of a specific property by using the sold prices of recently closed, nearby sales of similar properties. What your neighbor has his unit priced at is not a relevant fact. What he sells it for is. If anyone would like a list of comps for a specific property type or an opinion of value I'm glad to provide it.

When a problem comes along , You must whip it . 
Before the cream sets out too long , You must whip it . 
When something's goin' wrong, You must whip it.
Now whip it, into shape. Shape it up. Get straight. 
Go forward. Move ahead. Try to detect it. 
It's not too late. To whip it. Whip it good.

-- Devo, musically commenting on the value of confronting problems rather than letting them fester

Is This Your Listing?

It might behoove sellers to examine their MLS listing. In addition to erroneous information the photographs may leave something to be desired. A quick reread of "How To Choose a Real Estate Agent" could prove productive.

Is this your chandelier?

The market seems to have slowed somewhat although listings continue to sell quickly if priced right. Of the 42 closed residential sales so far in July in Cocoa Beach and Cape Canaveral seventeen had a contract in four weeks or less, ten of those in six days or less. Of the 74 new listings since July 1, eighteen have already sold.

Inventory this morning remains very low with just 61 single family homes and half-duplexes and 187 condos and townhomes offered on the Cocoa Beach MLS in our two cities. Of the condos, thirty eight are asking above $500,000 but only fourteen asking less than $100,000. There is a lone short sale and eight bank-owned units offered. Three of the eight bank-owned are being offered as online auctions.

If you have seen some too-good-to-be-true prices on the MLS you may have been looking at an auction listing. Some of the banks are placing their auction listings in the MLS with very attractive asking prices. The opening bid in every auction I've followed has been far below the reserve price which has likewise been far below the final selling price.The small print on these online auctions contains a few interesting items. Buyers should exercise caution in these sales. Examples of the fine print:

• The Auctioneer may bid on behalf of the Seller up to the amount of the Reserve Price by placing successive or consecutive bids for a property or by placing bids in response to other bidders. Any such bids placed by the Auctioneer will not result in a Winning Bid.
• A buyer’s premium equal to the greater of 5% of the winning bid amount or $2,500 will be added to all winning bid amounts that will determine the total purchase price.
• Buyer will receive a Special Warranty Deed (SWD) or equivalent.
• If you purchase a property and do not complete the transaction your credit card will be charged for $2,500.  

A Royale Towers direct ocean 6th floor corner was auctioned this week. It showed in the MLS asking $275,000 with an opening bid on the auction site far below that. It attracted brisk bidding and sold for $340,500 to which the 5% buyers premium will be added. It will be interesting if this sale goes through the first right of refusal at Royale Towers or if a bank-owned unit is exempt from the process there. There are some complexes in which banks do not have to present a contract for first right.

I was involved in a multiple offer situation this week. When I called to alert the listing agent that an offer was forthcoming she said that she already had another offer that was "cash and higher than mine". She also offered that she hoped she hadn't mis-priced the house as it had multiple offers by the second day on the market. Hint: she did. I asked how she planned to handle the multiple offers to which she responded, "I don't know. I've never been involved in a multiple offer situation." Uh-oh. I suggested that a call for best and highest is how it's usually handled but she may want to talk to her broker. She said she'd call me back before they negotiated any offers. We got the call for best and highest shortly and our considerably over asking price, cash, quick close was bested by another. I don't want to fall into the suspicious mindset that most buyers do when asked for best and highest but considering her disclosure to me of the "cash and higher than mine" offer and her inexperience with multiple offers, well, ...

If anyone thought it had been raining ususally often and hard in Cocoa Beach the last few days, they'd be right. Somewhere between 8 and 10 inches in the city in the last two weeks.

"Rain makes corn, corn makes whiskey
Whiskey makes my baby feel a little frisky"
_____________________Luke Bryan

Sensationalism With Malice

I almost choked on my salmon nigiri last week when I read the headline "Cocoa Beach City Staff Proposes 20% Tax Rate Increase". After a quick self-administered Heimlich, my suspicious nature re-engaged and I began to suspect a facts massage. Yep. The proposed 20% increase being reported was to the City of Cocoa Beach millage part of the property tax bill, result of which would have increased Cocoa Beach property owners' tax bills by .1% not 20% as shouted by the anti-tax crowd. Technically correct but a blatant twisting of the facts intended to mislead residents. For the record, had the increase been passed, our fair city's tax rate would still have been far less than the majority of areas in our county including Satellite Beach, Palm Bay, Melbourne and Rockledge among others. If a one tenth of one percent increase in my property tax will contribute towards improving infrastructure (City Hall in this case) in my home town I'm for it. Shame on the folks who tried to mislead the public with their sensationalist red herring.

This morning during the final of the Jeffreys Bay Open pro surfing event in South Africa, former world champ Mick Fanning was attacked by a shark as he sat on his board waiting for a wave. He was knocked from the board but during a frantic, thrashing few moments was able to get to a safety patrol jet ski with nothing worse than a leash chewed in two pieces. The event is off for the day.

How about the cool ocean breeze recently? The water temp in the surf has dropped almost ten degrees in the last week back into the mid 70s providing natural AC for those within range of the sea breeze. The daily afternoon two inches of rain hasn't hurt either.

"My passion for surfing was more than my fear of sharks."  ___Bethany Hamilton

Mission Creep

Mission creep: the tendency of a target or goal to change or evolve as a mission progresses. It's a rare property search that doesn't involve some mission creep.

A typical condo search will usually begin a with a list of important criteria. One's mental image of the perfect ocean condo might be a three bedroom, upper floor corner unit with a two car garage in a complex with tennis courts, pool and hot tub that allows weekly rentals and large dogs. If searching in Cocoa Beach and Cape Canaveral that search is over before it begins as that particular unit doesn't exist. The mission to find an acceptable unit is going to have to creep away from the initial target if it is to ever be successful. There are some criteria or combo of criteria that so limit a buyer's choices that a unit is unlikely to ever be found. If looking in Cocoa Beach and Cape Canaveral for a three bedroom condo that allows weekly rentals the choices are immediately reduced to five complexes. The same shortage of choices exists with complexes that will allow a dog over 50 pounds. Combine the two criteria and you've eliminated all the possibilities. Similarly, making a two car garage a must-have will severely restrict the possibilities. Not impossible but begin to add other unbending criteria and the list starts to dwindle rapidly.

It makes sense before beginning a search to list all the things that are important and to decide which ones are must-haves. A list of pretty units assembled from the MLS or Zuliator.com might not contain a single unit that will work because of missing features or restrictions not mentioned in the listing. Talk to your agent about the reality of finding a unit that matches your criteria before putting together a list of units that look good but may not work for you. You might decide that a two car garage is not as important as being able to bring Scrappy Doo to the condo with you. Prepare for the possibility of mission creep. Attractive properties are out there and available for purchase. Flexibility increases your choices.

The fantasy of finding the smoking deal or the non-existent property may be sufficient payoff in itself to stay in the hunt. While that fantasy may be gratifying, the downside may be never realizing the original goal, that of owning. Elizier Yudkowsky wrote an interesting analysis of lottery players and the implications of banking on a fantasy with a probability approaching zero. Partial excerpt from his piece below.

"Some defend lottery-ticket buying as a rational purchase of fantasy. But you are occupying your valuable brain with a fantasy whose probability is nearly zero, wasting emotional energy. Without the lottery, people might fantasize about things that they can actually do, which might lead to thinking of ways to make the fantasy a reality. To work around a bias, you must first notice it, analyze it, and decide that it is bad. Lottery advocates are failing to complete the third step. If the opportunity to fantasize about winning justified the lottery, then a "new improved" lottery would be even better. You would buy a nearly-zero chance to become a millionaire at any moment over the next five years. You could spend every moment imagining that you might become a millionaire at that moment."

Searching for a non-existent property/deal is a form of this "new improved" lottery. Gratification every waking moment dreaming about the possibility of buying the $250,000 upper floor, SE ocean corner 3/2 but never finding it. The prospective condo purchaser who actually wants to buy a unit needs to prepare for the possibility of some mission creep. This is especially relevant right now with inventory of properties for sale at an unprecedented low. The MLS is showing 187 condos and townhomes for sale in Cocoa Beach and Cape Canaveral this morning with fully a third having been for sale for six months or longer. The implication is that just a little over 100 units are priced fairly. Compare that to the 1200 unit inventory just nine years ago.

Need help in your search? Larry@southcocoabeach.com

“Slippery slope. I carry a spare shirt, pretty soon I'm carrying spare pants. Then I'd need a suitcase. Next thing I know, I've got a house and a car and a savings plan and I'm filling out all kinds of forms.”  ___Jack Reacher

Must Be Potty Trained - Oh No, You Didn't

Your condo's pool rule sign is almost certainly discriminatory. When I first moved to Cocoa Beach 25 years ago I became the go-to sign guy for the community. During a ten year run before hanging up my cleats, among the thousands of signs I made were pool rule signs for most of the local condo complexes. Some consisted of just the mandated rules by the State of Florida shown on the sign pictured (note that pools larger than 200 square feet also require NO DIVING in at least four inch letters which really screws up the layout). Then there were the associations that took a little more hands-on totalitarian tone with their posted rules. I've made pool rule signs with over two dozen rules and came to realize that a condo association's personality could be revealed by the number and tone of their pool rules. Prospective condo buyers, this is a LifeProTip. Check out the pool rule sign at the complexes you're evaluating. If you see the words "horseplay" or "jean shorts" or "long hair on men" or anything relating to profanity or music, a more in depth look at the personalities in charge might be in order. Not everyone wants to live in a community that prohibits horseplay. I pissed off more than a few condo commandos by suggesting that instead of listing their 20 additional rules we could simplify things by just adding a single "NO FUN" rule. I don't remember that suggestion ever being received gracefully.

I now know that many of the rules included on some of the local pool signs are discriminatory and in violation of The Fair Housing Act. Condo commandos reading this, it might be prudent to check your sign and have any discriminatory rules removed before another reader that you may have bullied seizes the chance to return the grief. If you have any rule that begins with "Children" or "Adults" you are almost certainly in violation. Here's a good article by an attorney on the subject. By the way, "NO FUN" is not discriminatory nor a violation. Maybe its time as the alpha rule has come.


"I'm not afraid to look like an idiot."  ___Anthony Bourdain

Tax Expectations

As I'm showing property to new clients for the first time I am often asked "What are the taxes on this one?" Most MLS systems and real estate websites display the previous year's property taxes on listings. My research tells me that a new owner can expect his taxes to be about the same in about half the cases. It's the other half that should keep prospective buyers from seeing this as anything other than a mildly-predictive historical note.

I pulled 24 property sales in Cocoa Beach that closed in June and July of 2013 at prices greater than $150,000. All but one of the 24 sales were at prices higher than the Property Appraiser's market value at the time of sale. [Note: this confirms that the PA's market value is not an accurate predictor of selling prices.] Half were then homesteaded by the new owners and half were not. I compared the seller's market value assigned by the Property Appraiser at the time of the sale in 2013 to the new market value assigned a year later for the 2014 tax year. Surprisingly to me, over half of the sales had zero increase in market value and were about evenly divided between those homesteaded and those not. All but one sale had tax increases of less than 25%. The one higher exception was a long-time homesteaded property with a partial interest sale that triggered a reassessment and a rise in the artificially low taxes from $2700 to $4900 a year. Note for anyone considering selling a partial interest.

Another surprise was that taxes for new owners in general have come down as a percentage of purchase price. Another random sampling showed that the total tax bill for most properties in the sample group has barely budged in six years. Average tax bill for all 24 properties in the first group was less than 1.5% of the purchase price, much less for homesteads. I am happy to share the actual range and average of both categories with anyone who's interested.

"Next in importance to having a good aim is knowing when to pull the trigger."  __David Letterman

All the Wrong Questions

The brutally cold winter of 2015 reignited a common dream for many, that of owning an income-generating vacation getaway in a warm oceanfront place. Cocoa Beach has made that dream a reality for many. Over the years I have gotten scores of requests for an ocean condo that would pay for itself while serving as a getaway for the owner. For most people, that condo does not and never has existed. Change "pay for itself" to "pay some of the costs" and units begin to materialize.

What questions should a prospective buyer of a rental ocean condo ask the seller? Some questions may have misleading answers. Let's look specifically at vacation rental condos, those with a minimum rental restriction of a week or less. In Cocoa Beach and Cape Canaveral there are less than 15 oceanfront complexes that allow weekly or shorter rentals. Because of the scarcity, high occupancy and income are possible in most of these units. For a buyer inexperienced with vacation rentals, these units can be difficult to evaluate. The previous years' income statements often won't accurately predict a new owner's likely performance. As mutual fund disclosures tell us, past performance is not an indicator of future returns. A buyer using previous years' statements to include or exclude properties for consideration may be making flawed decisions.

Imagine the owner of a nice weekly rental vacation condo in Cocoa Beach who stays in his unit several times every year. His annual income statement is going to show less income than the neighbor's identical unit that is available for rent during the entire year. The difference can be tens of thousands of dollars.

Imagine two identical units side by side each rented by different property managers. One manager charges 28% management fee and the other charges 20%. One manager, not necessarily the more expensive one, gets 20% higher occupancy. The net income difference can be significant.

A buyer who purchases a unit because it had a high net income may realize too late that he can't achieve that net because he can't manage as cheaply or as effectively as the previous manager. On the other hand, a smart buyer can buy a unit with a history of low net and turn it into a high net with higher occupancy and more efficient management.

Weekly rental vacation rental condos offer the greatest opportunity for a mix of personal use and income but prospective buyers need to be realistic with their expectations and know going in that very few units can pay all carrying costs from rental income if the owner is also occasionally using the unit. The timing and frequency of personal use can vary the net income drastically. An owner who uses his two bedroom oceanfront unit the month of March might lose $4500 in income but an owner who stays the month of October instead might lose nothing. A good buyer's agent will be able to guide buyers through the breakdown of seasons and strategies for maximizing income.

"I realized I might be lower on the social scale than I previously thought when the Real Housewives "Shabby chic" party looked exactly like my "dress nice" parties."  __Larry