New Construction in Cocoa Beach

Woke up this morning to an announcement of a new Cocoa Beach oceanfront building by the Dorough Brothers. Most will remember Howie Dorough as a member of the Backstreet Boys. The brothers' company has been a prolific developer and investor in our area for over a decade with multiple oceanfront buildings under their belt. The new building, Flores de la Costa, is going up just north of Wilson Ave. in the north end of Cocoa Beach. Units are two, three and four bedrooms and sizes range from 1133 to 2460 square feet. Pre-construction prices for the units currently offered in the five story building range from $258 to $380 per square foot with prices for the 2/2 units at $325,000. With a two week rental minimum these look very attractive from an investment standpoint. These prices should be a wake-up call for some sellers of oceanfront units in other, older buildings.

Buyers looking for an oceanfront unit with at least three bedrooms currently have 43 other units to consider if  the Mystic Vistas A and B buildings are included as oceanfront. [Readers know that I don't consider Mystic as oceanfront] Sellers of sixteen of those units in the older buildings asking over $340 per foot may want to reconsider their asking prices.

Also on this morning's hotsheet are two brand new townhouses two blocks from downtown Cocoa Beach. Construction has already begun and these two, 3 BR, 2.5 BA units will share a dock and both have a two car garage. Asking prices are $379,000 and $389,000.

Now for recent shenanigans. I showed a house the other day that is listed on the MLS as being concrete block construction with four bedrooms. The listing agent is known for being difficult and I've shared stories in the past of a few crazy encounters with him. This particular concrete four bedroom house turned out to be a wood frame two bedroom house with an extra "bedroom" in a separate structure in the back yard. The homeowner was shocked to find out that it was listed as a four bedroom and said she'd call the agent immediately to correct it. Two days later it is still unchanged.

After an intense downpour during the night in Cocoa Beach, the sky has cleared and it's already 74 degrees and forecast to hit 79 by early afternoon. We will hit the 70s every day for the next week according to Weather Underground.

"We should be MOST skeptical of ideas we like because we are sufficiently skeptical of ideas that we don't like."  ____Penn Gillette

How We Doing?

We be doing just fine. As expected, closed sales in the first month of the year were somewhat slow which has been the trend for the twelve years I've been tracking the Cocoa Beach housing market. Historically December is the slowest month of the year followed closely by January. (See the monthly breakdown of the last eight years in the chart below.) Things pick up quickly after January and the five months March through July usually account for over half of the year's sales. I think we can expect that trend to continue in 2016 especially considering the big jump in inventory. The for-sale condo inventory in Cocoa Beach and Cape Canaveral increased to 281 units by the end of January. That's over a hundred more than just five months earlier.

During the month 43 condo units closed compared to 46 last January. Sales of note included the following:

• A gorgeous 3 story, 12 year old townhome in Cape Canaveral with peeks of the ocean and 3087 square feet and two garages closed for $725,000.
• Two direct Banana River Harbor Club units in Cocoa Beach closed in January. One was a 2nd floor 3/3 with 2417 square feet that closed for $515,000. The other was a 2nd floor 3/2 with 1805 square feet and sold for $384,000.
• An unusual 5th floor direct ocean Driftwood of Cocoa Beach. This unit was actually two combined units with a total of 4 bedrooms, 3.5 baths, 2 carports and 2507 square feet. It sold for $448,000.
• A furnished 3rd floor direct ocean Canaveral Towers 3/2 in original condition. Weekly rentals allowed in this building makes for an excellent income opportunity. It closed for $370,000
• Another weekly rental building, Sandcastles in Cocoa Beach, had two closed sales in the month. Both were west end 2/2 corners with side ocean views and 1286 square feet and garages. The north side 7th floor with a better view closed for $352,000 and the 6th floor south side unit closed for $320,000.
• A north facing 11th floor 2100 Towers 2/2 with 1400 square feet and a garage closed for $350,000.
• A remodeled 4th floor direct ocean Park Place in downtown Cocoa Beach with 1316 square feet and a garage closed for $337,500.
• A furnished direct ocean 2nd floor Ocean Pines 2/2 in downtown Cocoa Beach closed for $325,000. Had 1353 square feet and a garage and was in original condition.
• A 1st floor direct ocean Beach Winds 2/2 just north of downtown Cocoa Beach sold for $292,500 in five days. It was the extra wide Sand Dollar floor plan with 1478 square feet and had a garage.
• A 1st floor beautifully remodeled and furnished direct ocean Sea Oats 2/2 with 1278 square feet and no garage sold for $280,000 in eight days.

Single family home inventory is still tight with only 66 homes for sale in the two cities. In the month of January eleven homes closed at prices between $175,000 for a fixer-upper 3/2 to $1.15 MM for a five bedroom direct ocean home south of downtown Cocoa Beach.

Snowbird season is in full swing with the golf course and the grocery stores clogged once again. Expect to spend up to three hours playing nine holes at the Cocoa Beach Country Club and wear protective padding if braving the aisles of Publix. Many of those sweet snowbird ladies are hockey fans and will not hesitate to check you against the cooler door if it looks like you're breaking away for the express lane.

If venturing out to the schools or Country Club area around 8 AM or 3 PM, remember the detour around Minutemen Causeway between Brevard Ave. and Cedar. You'll thank me if you approach the detour on any street other than North 1st. Take N. 2nd, 3rd or 4th to Cedar and avoid the bottleneck that the school traffic causes twice daily on North 1st St.

"Always remember: Success is due to your intelligence and effort. Failure is due to the political party you didn't vote for."  ___Morgan Housel

You Want How Much? Really?

Sorry for the time between posts. The new year has gotten off to a busy start here in the home of Florida surf culture. Thanks to Pam Werneth for the awesome shot of the girl surfers at the Pier. These girls not only rule in the waves but also rip on their skateboards. For me, this shot epitomizes life growing up in Cocoa Beach. Kids in the surf and riding skateboards to school. Many of you Cocoa Beach locals know Pam and her jewelry. If you don't, check out her very hip creations at JewelrybyPam.com 

At least one of my hopes for the new year has been realized, more inventory of properties for sale. In the two weeks since January 1 there have been 66 new condo listings in Cocoa Beach and Cape Canaveral. Not surprisingly twelve of those already are under contract. Our total condo and townhome inventory in our two cities stands at 261 units this morning, 19 of those yet to begin construction. That's the highest number of units for sale since May 2014. None of those are short sales and only five are bank-owned.

Single family home inventory remains very low with only 56 properties for sale right now. None of the 56 are short sales or bank-owned. We've only had seven new single family home listings this year and four of those are already under contract. I don't know if Snowman is still out there but I think we can put to rest once and for all his impending flood of listings from the banks' shadow inventory.

I expect the supply of new listings to continue barring some unforeseen event. Demand is strong and prices have not run away. Prices for most properties are still well below the highs of 2006. Example, direct river Harbor Isles 2/2 units. Two closed in 2006 for $290,000 and $335,000. Prices declined and at the bottom, five units closed under $150,000 between 2011 and 2013 and have been gradually increasing since. One of those five was totally remodeled and resold last year for $259,000. There is a new listing this morning of a nicely remodeled unit for $238,000.

Those looking to purchase have a decent supply to choose from depending on criteria. If the criteria are weekly rental direct ocean condo with three bedrooms, there are only two to consider. If the criteria are east facing direct ocean above the ground floor with at least two bedrooms and two baths, there are 31 possibilities between $2.386 MM and $350,000. [For the record I didn't include Mystic Vistas units as the row of townhouses between those buildings and the ocean keeps them from being "direct ocean". Shoot me. For the same reason I excluded Conquistador units in the building on the west side of Ridgewood. Hardly direct ocean although some are described as such in the MLS. If the price seems too good to be true for a direct ocean unit it almost always is. Listing agents tend to go with what has been allowed in the MLS in the past and Conquistador west building units and everything in Villages of Seaport continue to be listed as oceanfront although, in the case of some Villages units, over half a mile from the beach.] OK, back to the 31 units matching my search. At least a third of them are ridiculously overpriced. About half are fairly priced or within striking range of what I consider fair value. There is a handful that I consider bargains at current asking and two that are fairly priced trophy units. Contact me if you need a hand separating the good from the bad and the ugly.

I've had some interesting encounters over the last two weeks that I'll share in an upcoming post. I have also had the pleasure of working with three outstanding listing agents this week. I often bash poorly performing listing agents here and will continue to but I need to recognize good performance when I encounter it. Without naming them, there are three ladies from south of Patrick who went above and beyond to help sell their respective clients' properties. Your efforts are appreciated. For the agent in Cocoa Beach who forgot to mention to the tenant that we were showing the unit, not so much. I reluctantly also offer congrats to the Crimson Tide. Whatever.

"Some people are born on third base but think they’ve hit a triple."
___Mark Kingwell

The Balmy Wrap-up

It's hard to believe that it is the last day of the year. 8 AM and it's already 76 degrees and predicted to hit 84 which is 17 degrees higher than the average temperature in Cocoa Beach on December 31. The sky is blue, there is just a breath of wind and there is a small, waist high junky swell for those so inclined. Water temp in the mid-70s so wetsuits aren't necessary or even desirable.

Sales have remained slow since my last post but we have managed to close 704 condos and 164 single family homes for the year in Cocoa Beach and Cape Canaveral. Only 26 of the home sales were in Cape Canaveral but a remarkable 11 of those were in the small neighborhood of Harbor Heights in Cape Canaveral.

In Cocoa Beach we saw the highest price ever paid for a home when the oceanfront Pumpkin Center estate just south of downtown closed for $4,000,000. This estate sits on 200 feet of direct ocean and has over 10,000 square feet in multiple buildings with 11 bedrooms and 13 baths. Contrast that with another direct ocean home in south Cocoa Beach sitting on 50 feet of oceanfront that sold for $675,000. Someone scored a killer deal.

Of the 138 single family homes closed in Cocoa Beach this year, 37 sold for a half million or more. Lowest price paid was $120,000 for a tiny 2/1 cottage close to downtown. Overall median price was $375,000 and a little more than a third were purchased with cash.

Of the 704 condos closed so far over half were purchased with cash, 61% to be exact. Ten percent of the sold condos were bank-owned and 14 were short sales. There were 27 condos closed for a half million or more with the highest paid, $1,250,000 for a top floor southeast corner Meridian that sold in seven days on the market. That price came out to a jaw-dropping $508 per square foot. Unique properties command unique prices. Median condo price was $175,000 and lowest paid was $29,900 for a tiny efficiency at The Plaza in Cape Canaveral.

There are almost certainly dozens of people right now who hope to purchase a direct ocean (east facing) condo unit here in the coming year. Those potential buyers need to have a grasp of what units are worth if they hope to be successful in their quest. Prices paid for the 80 direct units that sold in 2015 ranged from $187 to $362 per square foot (if dropping the highest and the lowest). Pricing by the square foot is inexact but it's usually the best starting point in an exercise of estimating value. The median was $250/sf with only three units selling for more than $300 per square foot. Those properties that sold for more than $250 per square foot were generally newer or nicely remodeled and/or furnished. Buyers and sellers need to remember that their estimate of value, no matter how they arrived at it, is an estimate. The opposing party will almost always have a different estimate. Sales happen only when the two parties can reach an agreement or compromise on that estimate. I hope I can continue in 2016 to help many of you in your quest to acquire the perfect beach getaway in our favorite Florida beach town. A happy, safe and prosperous new year to all. Larry out. 

"You are the average of the five people you spend the most time with." ___Jim Rohn

A Big Thank You

I'd like to offer a few thanks to the listing broker with whom I just closed a sale. Thanks for always taking days to answer (when you actually did) my requests and questions about your listing both before and after we had an accepted contract. I got the impression that you check email once a week, texts every other day and never answer voice calls. Thanks for "leaking" the price of the other offer to me so my client could beat it. Shame on you for then taking our price to the other agent and "leaking" it so they could better it. Thanks for costing your client two full weeks by refusing to present our first offer because you didn't like the length of the inspection period. Thanks for then agreeing to those very same terms two weeks later. Thanks for taking four days to get the agreed-upon offer signed and returned. Thanks for never bothering to respond to repeated requests for survey and utility questions. Thanks for not bothering to get the seller to sign the last addendum until I offered to drive by for you to get it signed rather than miss closing date. AND, thanks most of all, for going on an cruise the week of closing without telling anyone and telling the seller that it was OK to keep a key and finish moving two days after closing. I assume you're back but who knows since I haven't heard a peep from you since the week before closing. Your client was impressed with how hard one of us worked. Guess who.

As we approach the holidays, property sales have slowed. After closing two condos a day every day since January 1 in Cocoa Beach and Cape Canaveral, only 26 condos have gone under contract since the first of December. That's not unusual and will likely change right after Christmas. In years past, activity has been at times frantic in the last week of the year and then ramping up as we move into the our busiest time of year. This coming year 2016 might be slightly different as we are entering the year with the lowest starting inventory in history. Or, maybe not, as we have continued to beat the preceding year every year for the last ten even as inventory continued to shrink. We'll see. Consider our starting condo unit inventory levels in recent years:

• January 2010 - 525
• January 2011 - 459
• January 2012 - 365
• January 2013 - 300
• January 2014 - 303
• January 2015 - 251
• December '15-  224

We officially set a new sales record this week when closed condo sales in Cocoa Beach and Cape Canaveral passed last year's record 682 units. We look to easily pass the 700 mark by year's end. That means we'll have to sell more than three times the existing inventory to hold the same pace next year. Not an impossibility but definitely a challenge. I'm up for it. Those of you looking to purchase need to be nimble and ready to move quickly when your ideal property presents. If planning to use a mortgage to purchase, talk to your lender now instead of waiting until offering. Happy hunting and may the Force be with you.

Wishing everyone a safe and happy holiday season and a positive and prosperous new year.

“In case it’s not clear yet, the language of real estate listings is bogged down in secret rules and code words. It’s a language where 'modern' means the opposite, and 'unique' is just about the worst thing you could be.” ____Spencer Rascoff, Zillow CEO 

Hope, Greed and Bad Advice.

This post was inspired by the closing this week of one of the handful of units that originally sold at completion at a big, new south Cocoa Beach condo complex in 2007. Nigel and Keanu are fabrications as is the story but the numbers are real. I have no idea who the actual parties to any of the pre-construction transactions were other than the cracker-jack real estate agent who sold several of the pre-construction contracts. He is very real but shall be identified only as "Cracker Jack".

It's the year 2005 and it seems almost everyone is making money hand over fist speculating in real estate. Keanu's neighbor, Nigel, refinanced his house and has been using the cash-out money to reserve pre-construction condos for 10% down and then flipping the contracts prior to closing for several times his investment. He made over a hundred thousand bucks on just two contracts at Portside Villas and is currently sitting on contracts at Solana on the River, Somerset in Titusville and Island Pointe in Merritt Island. These contracts look to profit several hundred thousand by the time he flips them next year.

Nigel calls Keanu one afternoon with the news that his cracker-jack young agent has somehow scored a pre-construction list for a just approved riverfront project in south Cocoa Beach. If Keanu wants in, 10% will reserve one of these to-be-built units starting at $549,900. The price only has to move to $600,000 to double the investment and a triple or more is possible depending on where the market is by the time the contract is flipped to another buyer. Both of them decide to go for one of the $549,900 units and plop down $54,900 each for the reservations.

As the buildings go up, things are looking good. Nigel flips one of his other contracts for a tidy profit but decides to sit tight on the remaining ones for more money. Both list their pre-construction units summer of 2006 for mid-$600s and mentally begin counting the profits. One little snag, the developer hasn't been able to sell all the units and is still offering identical units for $549,900. A few months later the notice of impending completion goes out and closings are set for early in 2007. It is now time to come up with the remaining $500,000 and close on the unit or, gulp, default on the contract and lose the $54,900 deposit. Nigel has a slick mortgage guy who will finance the entire remaining balance with a no documentation, interest-only jumbo mortgage at 6.5%. That's his plan as he expects to resell the unit for much more after the developer unloads his remaining units. After much thought and with much regret Keanu makes the very difficult decision to walk away from the $54,900 deposit. Nigel closes and mortgage, fees, taxes and insurance on his unit run just over $3900 a month.

Something feels different going into 2007. The optimism has evaporated almost overnight. The developer hasn't sold another unit and only closes eleven units that year. Nigel's cracker-jack agent suggests renting his unit while waiting for the market turnaround and is able to get a tenant for $1350 a month. After bleeding money every month for two years Nigel lists his unit for sale for $398,500. No takers and he rents again for $1350. Fast forward to summer 2014 and the unit is listed again sans tenant for $410,000. Unfortunately, the developer still has unsold units and is offering an identical unit for under $400,000. Nigel's unit sits empty until this week when it finally closes for $346,500. That's over $200,000 less than paid in 2007 and after almost eight years of over $2500 a month negative cash flow. For all Keanu knows, Nigel may have stuck the lender and association for a good portion of the losses and is vacationing in Cannes. For Keanu the evidence suggests that the decision eight years ago to walk away from the $54,900 deposit may have saved him more than a quarter million dollars. He has no idea how Nigel's contracts at the other complexes played out. Nigel hasn't mentioned them since 2007. The cracker-jack agent is still around, older and, hopefully, wiser and still closing a couple of deals a year. His star faded significantly after evaporating over a million dollars of client money with ill-timed pre-construction recommendations. I have a fond memory of the developer asking me after giving me the same list of available pre-construction units "Why aren't you selling any of these units to your clients? Cracker Jack is on fire." Really? Less than a year later the National Association of Realtors launched their ill-advised $40 million "Now Is a Great Time to Buy or Sell" campaign. They were half right. 

“We are ripping you off like no one has ever ripped anyone off as a per-unit basis,” but ”We are also building a time bomb that’s going to flatten us forever.” Sasha Frere-Jones talking about the music industry's shift in the 90s to CDs selling at higher prices than albums but, in the process, setting up the apparatus for music pirating with digital copies in the hands of the now-pissed-off consumer.

What's It Really Worth?

"What do you think it's worth?" That's the (literally in some cases) million dollar question. No one wants to sell for less than actual value or pay more than, but no one, appraisers, tax authorities, Realtors nor Zillow, has an always accurate method for determining present value of a property. In the rare situation of multiple recent sales of identical properties we can get very close. For everything else, looking at recent sales of the most similar properties, holding a wet finger in the breeze and adjusting accordingly is the best anyone can do to estimate current value. These adjustments are where the variations happen.

How much more, if any, is an identical 10th floor unit worth over a 4th floor? 3rd over 1st? How much should I deduct for no garage or add for a second garage? No elevator? High ceilings? Forty year old versus 15 year old building? Is a weekly rental unit worth more than a three month minimum rental unit? How much discount for a compromised ocean view? Is a complex with tennis courts worth more? How about reserve account balances? There are so many variables that the best anyone can do is come up with their best idea and hope to land on the good side of their estimate.

This is where it can get interesting. If I do my homework and crunch the numbers carefully and come up with a number that I trust is close, I will probably still have to be flexible if I hope to consummate a sale as the other party's opinion of value is almost certain to be different than mine. If I treat my number as a line not to be crossed, I am setting up for failure. I have seen deals fall apart with buyers and sellers whose drop-dead numbers were ridiculously close but which neither would violate. If I am selling in a dropping market, it may not matter if I accept an offer for less than I had hoped. Same holds true for buying in a rising market. If similar properties have been appreciating, paying more than my opinion of value might make sense. This is especially true when inventory is low. For everyone involved  it helps to remember that both sides' numbers are ESTIMATES.

Where do we start? Let's look at our bread and butter property here in Cocoa Beach and Cape Canaveral, a direct ocean condo with at least two bedrooms and two baths. The usual starting point for properties of similar size and condition with similar attributes is price per square foot. Units currently for sale (with one notable exception) have an asking price per square foot ranging from a high of $454 to a low of $154 per square foot. Both the high and the low may actually be priced to perfection. There are 18 units asking more than $300 per square foot. Only one unit has sold for more than $300 a square foot in the last 90 days. Remember, opinions and differences thereof. For the record, sixteen of those $300+/sf units are less than 15 years old. Newness generally commands a premium.

The bulk of the recently sold units with an unobstructed east ocean view sold for between $215 and $295 per square foot with half landing between $250 and $260 per square foot. To put that in perspective, that means a typical 1300 square foot 2/2 unit has recently been selling in a range of $279,500 to $383,500. Don't marry your opinion of value. There is a lot of wiggle room surrounding it.

Our takeaway: Your opinion of value, just like mine and every seller's and every buyer's is just an opinion. The owner of the luxury Cocoa Beach condo who just increased his price to $691 per square foot this morning no doubt thinks his opinion of value is correct. Now if he can just find a buyer with the same opinion he may be able to sell. Before a Meridian penthouse closed last month for $1,250,000 I thought that $500 a square foot was crazy for any condo here. My opinion had to change. Flexibility, my people.

"When I found the skull in the woods, the first thing I did was call the police. But then I got curious about it. I picked it up, and started wondering who this person was, and why he had deer horns." ___Jack Handy

Cash. What Is It Good For?

It's time for a statistics trip through the recent Cocoa Beach and Cape Canaveral residential real estate market. The more we know about the current market conditions and trends the better chance we have of being successful in a quest to buy or sell.

Sales have been brisk in 2015 outpacing every year for the last ten although we look to finish the year only slightly ahead of last year's 682 condo units closed. Unless we get an infusion of inventory, unlikely in my opinion, next year could show the first decline in ten years in sold units. Demand remains strong and prices continue to inch upwards.

Condos
Looking at the last 90 days of activity as recorded in the MLS, there have been 144 closed condos and townhomes. Another 62 have gone under contract in the same period but have yet to close. Cash remains king for condo purchases with 59% of the sales closing with cash. All sales over a half million dollars were cash. Just over half of the condo listings (74) sold in the first month on the market with a quarter of the total (35) selling in the first week. Dollars per square foot paid for direct ocean units had a wide range with a Meridian penthouse SE corner bringing a whopping $508 per square foot. The median for direct ocean units was $268 per square foot. If using this metric realize that it can have a wide range. Size of unit, condition and parking can account for wide variations. There are 204 condo and townhome units for sale this morning on our MLS.

Single Family Homes
In the same most recent 90 day period, 36 single family homes closed in our two cities. Two thirds of them were financed with a mortgage. Half sold in the first 45 days on the market with eight of those selling the first week. The median price was $408,000. There are currently 54 homes for sale on the MLS.

Karma police, arrest this man
He talks in maths
He buzzes like a fridge
He's like a detuned radio
____________________Radiohead