Sky's the Limit

In a post from this same weekend in 2018, I commented that pricing was getting ahead of itself with 44 units asking over $300 per square foot while only three condos had closed so far that year in that range. Jump to March 2022 and, as of this morning, 46 units have closed for more than $300/sq ft, with eighteen of those fetching over $400/sf. Sales of units commanding top dollar are no longer restricted to a specific property type and/or condition but are spread across multiple complexes with $400+/sf sales happening at Ocean Oaks, Stonewood, Xanadu, Canaveral Towers, Las Palmas, 2100 Towers, Park Place, Royal Mansion, Spanish Main, Royale Towers, Ocean Pines, Sandcastles and Riomar among others. Not all of these oceanfront units had garages.

MLS inventory of existing condo units in Cocoa Beach and Cape Canaveral the last few weeks has bounced around between 35 and 45 units while single-family home inventory has stayed between 13 and 19 for sale at any moment. Since Feb. 1 a total of 76 condo units have closed along with 13 single-family homes. Thirty of those closed sales since Feb. 1 were at least $500,000 with five of those over a million dollars. 

Most fairly priced new listings are getting multiple offers quickly and buyers are getting aggressive with their numbers and terms. It's not uncommon to see inspections and appraisals waived and many buyers are offering on properties sight-unseen. With so much competition, sellers are becoming more discerning with the offers they will entertain. They are wisely expressing concern with offers well above asking if they don't waive appraisal. Likewise, sign-unseen offers may be perceived as too risky. Buyers need to discuss all angles with their agent to figure out how to craft an offer than can compete. The less uncertainty an offer carries, the more well-received it will be. Expect the others to be offering cash with no contingencies and be prepared to lose to a crazy high offer. One last thought about multiple offers; a buyer who loses a unit to a higher offer will now be using that selling price as the new comp when they make their next offer. It's become a pay now or pay later dynamic.

Best of luck to buyers who are in the hunt. Be smart and quick with your offers and have an agent who knows the market and understands the competitive environment. Every edge matters and having a slow agent who doesn't understand our market dynamics or how to write a competitive offer will hurt you. Keep the offers as clean as possible, be prepared to pay more than you think it's worth (right now) and don't be slow to make an offer on a good property.

"Ever thine. Ever mine. Ever ours." __Ludwig van Beethoven 

Snooze and Lose

Property sales in Cocoa Beach and Cape Canaveral continue at a furious pace even as inventory hovers at just less than a month's supply. After declining steadily for sixteen years we seem to have settled into a precarious just-in-time balance between sales and new listings. There have been 115 new condo listings since Jan. 1. Eighty of those new listings have already found a buyer. During the same seven week period 104 condo units have closed, eleven of those in the unexplored range over $400/sq ft. There are currently 47 existing units offered for sale with another four proposed units available for reservation. Of the units currently offered for sale only half have been for sale longer than three weeks. I wonder why the units that have been on market for over 30 days have not sold yet. Could it be price?

There are a total of thirteen existing single family homes for sale in our two cities. Thirteen homes have closed since start of the year only four of which were under $500,000. The lowest priced current listing is $499,900.

As in previous years, over half of this year's condo sales so far have been for cash. Mortgage-seeking buyers are adapting in order to compete by dropping contingencies. I have rarely written offers in the past waiving inspections or appraisal but that has become normal. If the time period will allow for it, a buyer can offer cash and still get a mortgage in time for closing. In that scenario, the buyer better have a local lender who understands condo loans and can perform with a tight time period. If the lender isn't ready by close date, it's either close with cash or lose the deposit. I would not recommend offering cash intending to get a mortgage with an out-of-town lender nor if I didn't have the liquid cash to close with. Prudent listing agents are asking for increased deposits with cash offers to ensure commitment and to penalize failure. Buyers, prepare your offers accordingly and know that contingencies of any kind weaken your offer and open the door to a competing buyer who offers without contingencies. Good luck and be prepared to move quickly and decisively.

"I know worrying works, because none of the stuff I worried about ever happened." ___Will Rogers

Waiting in Vain

After trending up for a few months the inventory of residential properties for sale in Cocoa Beach and Cape Canaveral is shrinking again. There are only 60 individual residential properties for sale this morning in our two cities, 47 condos and townhomes and 13 single family homes. In addition, there are another seven unbuilt luxury homes offered by reservation in the much-delayed planned community on the river in south Cocoa Beach. 

Activity has been non-stop with 68 condos receiving an accepted contract since the beginning of the year. If the sales rate continues at this pace, the entire existing inventory of condos will have sold by Valentine's Day. Resistance to crazy high prices has all but evaporated and frustrated buyers have been paying prices that can't be justified by earlier sales. In the last two months seven oceanfront condos have sold for more than $400 a square foot, four of them without a garage. These prices put us in unexplored territory. Can prices continue to go up? Sure. Can they reverse course? Same answer. Buyers looking for return on investment can easily calculate whether current prices work with expected rents and occupancy. Those looking for a beach get-away for their family or for a primary residence should be more concerned with the property itself than with where prices are at the moment. I've watched careful buyers wait years because they thought prices were too high and would be correcting. For the last fifteen years or so those buyers either had to reframe their expectations or they never bought. Waiting for a correction that is slow in coming might mean not making memories at the beach during years when it would mean the most. Everyone has to decide for themselves. Paying 10% more than one thinks a unit is worth today will probably be inconsequential years down the road, especially if those years have been spent enjoying the family beach place that Mom and Dad overpaid for. Bob Marley may have been talking about this when he sang, "'summer is here, I'm still waiting there." 

"Let me be clear about this. I don't have a drug problem. I have a police problem." __Keith Richards

Against All Odds

Another year done and one in which we were still dealing with a disrupted economy. Despite the pandemic and related issues in the economy, 2021 was a multiple record setting year for Cocoa Beach and Cape Canaveral real estate. The number of residential properties sold in our two cities was the highest in history. Our average inventory was the lowest of all time and selling prices for many properties (not all) were at the highest levels ever.

Two years ago, January 2020, we began the year with 108 condos and townhomes and 21 single family homes for sale in the two cities. Inventory during 2021 averaged a little over half that in both property types. Despite the drastically low inventory we closed the most units ever, 863 condo and townhome units and 168 single-family homes. There are currently 14 single family homes and 57 condos for sale in the two cities. Anyone looking for a single-family home in Cocoa Beach for less than $625,000 has only one listing to consider. A buyer looking for an oceanfront weekly rental condo unit is completely out of luck with zero units offered on the MLS this January morning.

Vacation rentals were one of the story property types of 2021 when we saw an explosion of vacation rentals in buildings off the beach. That was fueled in part by the City of Cocoa Beach relaxing its opposition and enforcement of vacation rentals in previously prohibited off-the-beach areas. Prices being paid for those properties and for the few condos that allow weekly rentals skyrocketed. 

Vacation rentals weren't the only property type to see record high selling prices. Sellers of oceanfront units happily accepted over $300 per square foot for 43 different units during the year compared to just six the previous year and zero in 2019. That upward movement in prices continues with little resistance. Those hoping to purchase this year need to understand the dynamics at play and construct their offers accordingly. There will be competition for any desirable property and it is likely to include buyers who are willing to knowingly overpay. Buyers paid over asking price for 155 condos in 2021 and the majority of the remainder sold at or within 2% of asking price. Slightly more than half of all sales during the year were cash deals. Cash buyers always have an advantage over a buyer using a mortgage but that advantage has increased clout with these market conditions. With the current optimistic pricing, appraisals become an issue and the uncertainty that comes with that becomes a liability for a mortgage-seeking buyer. It is not uncommon for a seller to accept a lower cash offer over a mortgaged offer for just that reason. Don't lose that dream condo over a few thousand dollars if it's checking all the boxes. Pinch your nose, pay up, and enjoy the beach while market momentum closes the price gap after closing.

Welcome to all our new neighbors who bought in 2021. I hope Cocoa Beach turns out to be exactly the laid-back, friendly little beach town you were looking for.

"Wow. That's my husband. It's freaking Nazaré and I'm pretty sure he has a soft top with him." __Jordan Gravy

We Broke a Record

The pinkish/purple little flowers (above) that are seen on most local lawns this time of year are pusley or Florida Snow as it's more often called. It is invasive and, while pretty, not a welcome resident on most lawns. It is too low to effectively mow and resistant to almost all herbicides which we shouldn't be considering anyway because of runoff into the Banana River. I have embraced my infestation and it is thriving and providing an attraction for honeybees and butterflies not to mention it is pretty and hardier than my beleaguered grass..

Before dawn this morning an Atlas 5 rocket configured with five solid fuel boosters launched into the fog on the longest mission to date for the Atlas rockets. It will deliver two satellites into geosynchronous orbit 22,000 miles above the equator. 

More history was made yesterday morning when the 806th condo sale of the year in Cocoa Beach and Cape Canaveral closed. Until yesterday, 2005 was the year of the most condo sales with a total of 805 units sold. That year our inventory of units for sale bounced around 800 units for sale at any given time. This year's inventory has been the lowest ever recorded at an average of around 50 to 60 units for sale most days. This morning, it stands at 70 existing total units for sale. That we set a sales record with this depleted inventory is remarkable. I see no reason to expect the pace of sales nor the inventory to change in the near future. Good hunting out there.

"Life is like a ten-speed bike. Most of us have gears we never use." __Charles M. Schulz

Ghost Houses

Typical October beach crowd in south Cocoa Beach

The Cocoa Beach and Cape Canaveral MLS today is reporting 740 sold condo and townhome units in our two cities since January 1. Somehow, the monthly sales average (74 units) has exceeded the inventory almost the entire time (65 units for sale this morning). In addition to record numbers of sales, prices have been in record territory all year and continue to steadily climb. There have been 177 condo units closed for over $300 per square foot with 36 of those selling for more than $400 a foot. Despite the high prices on many properties there are a few units selling for less than their price at the peak of market mania in 2005. 

There have been 145 single family homes closed in our two cities so far this year, 27 of them over a million dollars. Among these 145 sold homes are seven million-dollar houses that don't exist but have been reported as closed in the MLS. They are supposed to be on a riverfront parcel in south Cocoa Beach but so far there are only a few piles of dirt where some of these ghost houses closed six months ago. There are 24 MLS-listed houses for sale this morning in Cocoa Beach and Cape Canaveral including seven more of the previously mentioned ghost houses offered as pre-construction. The listings don't mention whether or not a buyer will be expected to close before the houses are built. 

Hope everyone is enjoying the cooler weather. The highest predicted temperature for Cocoa Beach in the next ten days is 79. Hurricane season officially lasts through November but if we make it to the end of October without a hit, I let myself cautiously begin to relax. Work on the new Surf oceanfront condo building in downtown Cocoa Beach is moving along at a brisk pace. I'm still hoping that the cylindrical cell tower by the new police station will be decorated as a rocket but so far nothing. In case anyone's wondering, there are 55 days until Christmas. Happy Holidays.

“To be wealthy and honored in an unjust society is a disgrace.” __Confucius

Going Up - Lucy and Condo Fees

Lucy ascends into the clouds pre-dawn last week on a 12 year mission to explore the Trojan asteroids.

The concept of condominium ownership began in Florida in 1963 and in the next 18 years over a half million units were built. Those units are now at least 40 years old and represent 38% of the over 1.5 million units currently existing in the state. After the deadly collapse of Champlain Towers South in Surfside in June this year, the Florida Bar assembled a task force to review Florida Condominium law related to management, maintenance and inspection and to determine if changes or additions to current law could prevent or minimize the likelihood of a similar tragedy. The Task Force has completed it's review and has drafted recommendations for the Governor and Florida Legislature. Their recommendations, if adopted into law will affect all existing Florida condominiums.

After reading the report, here are some of my big takeaways. These are my interpretations and may not be exactly as intended by the writers of the report but I think I'm close. 

Florida BAR Task Force Recommendations

Structural Inspections: Requiring a structural and life-safety inspection by a structural engineer or architect by December 31, 2024 for all 3-story plus buildings older than five years and every five years thereafter. Miami/Dade and Broward Counties currently require an inspection and structural recertification for buildings by the time they're 40 years old. Boards will be required to inform owners of the building/s' condition after inspection. As it currently stands Boards are not required to share building issues with the owners and, in my experience, some Boards actively discourage discussions of issues to preclude those appearing in meeting minutes which could discourage prospective buyers. The report also recommends a path for owners to engage the State should a Board not perform it's duties to inspect and maintain.

Special Assessments: Voiding any limitations in the condo docs that limits the Board's ability to levy special assessments or to borrow money to perform repairs including requiring unit owner approval or voting to perform those repairs. This means that unit owners can't vote down special assessments they don't want to pay. Also, establishing a source of long term loans for owners who may not be able to afford a large special assessment.

Reserves: Establishing a baseline for reserves. Currently a Florida condominium association may elect to have zero reserves and, instead, levy special assessments to cover maintenance as needed. Most associations in our area have some level of reserves but very few have 100% funded reserves and even those that do rarely have funds specified for concrete repairs included. The Task Force recommendations are for at least 50% reserves for previously mandatory items and, included for the first time, building components with greater than 40 year life such as concrete, the whopper expense for any coastal high-rise building.

Local Government: Establishing some responsibility of local government to be involved in, or oversight of, the inspection process.

Insurance: The recommendations are vague here but the practice of under-insuring and using very high deductibles needs to be changed.

Summary - More regulation of condos is required to ensure public safety. That regulation will include building inspections (by both public and private sources), more frequent maintenance, higher reserves with newly included reserve items and better insurance coverage among other things. The impact to unit owners will be reflected in higher monthly fees to cover these new expenses. The impact will be felt least in well-maintained buildings with good reserves but associations with low monthly fees and deferred maintenance are about to become much more expensive for their owners. This is without considering insurance premium increases that may result from reconsidered risk in older Florida condo buildings that has nothing to do with the Task Force.

As a prospective buyer of a unit in an older condominium I would proceed with the assumption that the monthly fee will be increasing substantially over the next three years and that concrete work, if obviously needed, will probably be happening during that period along with a special assessment to pay for same. If I owned a unit in an older building with low reserves and with deferred maintenance I would probably be considering selling. Hey, don't shoot the messenger. This has been brewing for a long time. Will unit values in these buildings be affected? Absolutely, but they will almost certainly continue to go up until the impact is widely known. There may be a considerable period of continued appreciation before the piper demands payment. Feeling lucky? Well, do you?

Here is the entire Task Force report for those so inclined.

"I missed it in 96 and I'm not gonna miss it again." Ben Gravy referring to the approaching Hurricane Larry swell last month

We Had Our Offer Accepted. Now What?

Masked bandit at the Cocoa Beach Country Club.

This is an excerpt from a post five years ago. Those who haven't been involved in a Florida real estate transaction often don't know what to expect nor who pays for what. Here's a simplification of the basics. As always, the contract spells out the exact responsibilities for the parties involved. It is entirely possible to negotiate to have the opposite party pay for an item that is not customarily paid by their side.

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A real estate contract is considered executed when all parties have finished signing. After that, the next step is to send the file to the closing agent which in Florida is usually a title company or, sometimes, an attorney's office that is also a title company. The title company then does the title search, co-ordinates with the buyer's lender if a mortgage is involved, determines tax liabilities and gets an estoppel letter from the association if the property is a condo. They then pull all this together and generate a settlement statement with exact numbers in enough time for the buyers to wire their funds for arrival by day of closing and then have all parties sign their respective documents (couriered or emailed to parties who will not be attending actual closing), disburse funds after closing and record the relevant documents. It's a complicated and under-appreciated job. The majority of closers I work with are legit rock stars at the process. I often think of them when I'm in one of those closings that has run past an hour and the closer is slowly reading every document before sliding it over for signatures. I see it like paper route math. As a paper boy if I've got 100 papers to deliver and can throw four a minute from my speeding bike, I can do my route in 25 minutes. Slow my pace down by just 21 seconds per paper or stop for  a couple of short discussions with customers and that same route takes an hour. A closer who can only do one signature page per minute is going to take at least an hour to do a 60 page closing. There are stars who can do a sixty page closing in 15 minutes. You know who you are and I appreciate you more than I can express.

Title insurance rates tend to be very close among the different companies and government charges are identical but the settlement and other fees paid to the title company can vary by several hundred dollars. In my experience, the slower and less efficient the title company, the higher these additional fees. Makes sense. A closer who can only close two or three deals a day needs to charge more to make up for inefficiency.

In Florida the seller typically selects the title company since they are the ones paying (usually) for the buyer's owner's policy. If the seller doesn't have a preference, their listing agent will suggest a title company that's, hopefully, conveniently located and good at what they do. Sometimes they are neither. I wish it were different because the difference in closing agent can be the difference in whether a transaction closes on time or actually closes at all. Since the buyer has very little influence in the selection I would encourage listing agents to recommend title companies that are good at what they do and to please use one somewhat close to the property and/or principals. It is a disservice to the seller and buyer of a Cocoa Beach condo when the listing agent selects a title company in Palm Bay because it's convenient to her office. Likewise for continuing to use a company that wastes everyone's time with closings that last way too long. I'm thinking specifically about a closing last month attended by nine people that took an hour and a half for no good reason. There were times when I expected someone to poke the closer to see if she was still awake. For the record, this was at an attorney's office and not a title company. 

On that subject, listing agents, please stop insisting that the buyer's escrow deposit be held in an attorney's or title company's escrow account. By doing that you are depriving your client of the free dispute resolution offered by DBPR should that be necessary and ensuring that your client will have to waste money on an attorney to recover a rightfully withheld deposit. All parties to Florida real estate transactions are better served by having escrow deposits held in a Florida real estate broker's escrow account. A buyer's agent who offers to hold the deposit in their broker's escrow account is doing everyone involved a favor. Any listing agent who insists otherwise has either forgotten or is knowingly ignoring one of the most important parts of her required licensing education and is exposing her seller client to unnecessary risk. 

The scent of mullet has been strong at my office two blocks from the ocean every morning this week as millions of these fish stream southward in the surf on their annual migration. The dense schools are being shadowed by predators; snook, mackerel, ladyfish, bluefish, tarpon and sharks among others. It is the best time of year for surf fishing but like many years, long-period storm swells this year are making for challenging conditions. The chance of landing a legal snook makes the trouble worth it. Good luck to all the beach fisherpeople.

"“A theory may be so rich in descriptive possibilities that it can be made to fit any data.” ________Phillip Johnson-Laird