Some vacant lot owners still facing price challenges
As we run various property searches in the course of our everyday business, we often come across some interesting information. Such was the case recently, when we were looking into some vacant single-family home lots in the Cape for some customers, and we found that vacant lot owners who bought back during the peak of the market 12 to 15 years ago were still significantly underwater when it came to the current value of their lots. In an effort to help illustrate what the irrational real estate market of the past looked like, compared to the more rational market conditions of today, we expanded our search and had no problem finding more examples to show you.
Our research involved looking back at transactions that occurred around the height of the irrational market conditions, when real estate prices in Southwest Florida were escalating at a rapid pace, and tracking them through today. As vacant land and home prices were reaching their peaks in our area back around 2006, most people believed real estate could never decline in value. This was eerily reminiscent of the dot com bubble in the stock market in the late 1990s, when most people thought the high flying tech and Internet stocks could never go down permanently in value. In essence, vacant lots in Cape Coral and throughout Lee County had become like the infamous Pets.com sock puppet, thanks in large part to the easy money policies of the Alan Greenspan-led Federal Reserve, which helped inflate the real estate bubble.
If one could identify a positive benefit out of the real estate market collapse and the life changing financial devastation experienced by many in the aftermath of the completely irrational market of 12 to 15 years ago, it might be the ability to look back at this recent history and use it as a barometer for our current market conditions. As you will see below, a major takeaway from all of this is that the current prices for vacant residential lots in Cape Coral have gone up, but they are still well below the prices of 12 to 15 years ago.
Our search started with a request from an existing customer about some specific vacant lots in the Northwest Cape, in an area where the highest priced residential lot sold in the last 12 months was for just over $50,000 and the median sales price in this neighborhood is $19,500. Of the two lots we researched, one was purchased by the current owner for $145,000 back in March 2005, and the other similar lot on the same street was bought for $190,000 in January 2006. So in a 10-month period, the lot prices in this neighborhood increased by 31 percent. These types of inflated market gains were why so many people became self-proclaimed “experts” at flipping real estate until the music stopped and the market collapsed in a harsh game of musical chairs. Anyone who paid cash to buy a vacant lot at these peak prices was not only left without a chair, but they still face the painful reality of taking on a large loss should they decide to sell in today’s market.
After coming across the two lots in the Northwest Cape, mentioned above, we decided to run a search of the highest priced vacant residential lot sales in the Cape so far this year and take a look back at their transaction history. We found 14 closed lot sales at prices above $500,000 so far in 2019, with the top price fetching $950,000 in Tarpon Estates. It did not take us very long to find some examples to illustrate what occurred during the peak irrational markets of the past, and to use that information as a benchmark from which to judge our more rational market of today.
The vacant lot with the second highest sales price in the Cape this year, at $850,000 for a riverfront lot in the Savona neighborhood off of Del Prado Boulevard, provided an example of where prices are today versus the peak prices of 14 years ago. The seller of this lot bought it for $1.3 million in April 2005, and after holding on through the market collapse, they put it up for sale in October 2010 at an initial list price of $1,345,000. This lot remained on the market through multiple price reductions, until the list price was brought down to $989,900 in January 2019. It went under contract with a buyer in March, closing for 14.31 percent less than this last price reduction, and 36.8 percent below their initial list price of $1.345 million after spending 101 months on the market.
Another example providing a snapshot of the vacant residential lot market on a then and now basis was a vacant sailboat access canal lot in Unit 64, south of Cape Coral Parkway off of Skyline Boulevard. Back in January 2002, this lot sold for $210,000 before being flipped for $262,500 in June of that year. It was turned over again for $330,000 in August 2003, and that owner put it back on the market at a list price of $684,700 in 2005 and 2006, before lowering their asking price to $395,000 in 2007, as they chased the market lower. They eventually sold it for $179,900 in March 2012, taking a 45.48 percent loss on the sale. This next owner then flipped the property for $205,000 less than two months later, and the person who bought it put the lot back on the market for $250,000 in July 2012. They eventually sold the lot for $228,000 in October 2014. Five years later, the current owner has it listed for sale for 18 percent more than they bought it for in 2014, and at an asking price that is still about 18.5 percent below the August 2003 price of $330,000.
Going back to December 2018, there was a vacant lot sold in Tarpon Landings capable of accommodating a 90-foot yacht, that showed the type of losses some people suffered, as the records indicated this person bought this lot for $3.3 million in January 2006. They then listed it for sale at $7,895,000 in 2008, well after the market had already turned lower. They tried again at $3,595,000 back in 2015, before taking it off the market in 2016 after reducing the price several times down to $3,295,000. In November 2018, they set their list price at $999,000 before accepting $900,000 and taking a gut wrenching $2.4 million dollar, 72.73 percent loss on the property, not including any of the typical seller-related expenses.
(The sales data for this article was obtained from the Florida Realtors Multiple Listing Service Matrix for Lee County, Fla., as of Dec. 1, 2019. It was compiled by Bob and Geri Quinn and it includes information specifically for vacant single-family home lots in Cape Coral. The data and statistics for these vacant residential lots are believed to be reliable, however, they could be updated and revised periodically, and are subject to change without notice. The Quinns are a husband and wife real estate team with the RE/MAX Realty Team office in Cape Coral. They have lived in Cape Coral for over 40 years. Geri has been a full-time Realtor since 2005, and Bob joined with Geri as a full-time Realtor in 2014. Their real estate practice is mainly focused on Cape Coral residential property and vacant lots.)