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Cape condo supply tightens, except in dry lot condos

By BOB and GERI QUINN - Homing In | Nov 12, 2020

Frank Mann

Before we get into this week’s topic about the monthly supply of unsold condos and the tight inventory in our current market, we wanted to take a quick look at interest rates. According to Freddie Mac, for the week ending on Nov. 5, the interest rate on a 30-year fixed-rate mortgage fell to another record low at 2.78 percent, which is 24.66 percent lower than the 3.69 percent rate from a year ago. These same 30-year mortgage rates are down almost 44 percent from a level of 4.94 percent in November 2018, which is one factor driving the current mortgage refinancing boom. It should be noted that these rates do not include any lender fees related to the costs of obtaining a mortgage.

Also, the costs for refinancing a mortgage are scheduled to increase on Dec. 1, as the Federal Housing Finance Agency will be tacking on an additional 0.5 percent “Adverse Market Refinance Fee” to borrowers refinancing certain types of mortgage loans in amounts of $125,000 and up. This new fee has been deemed necessary to help cover the expected $6 billion plus in COVID-19 losses to Fannie Mae and Freddie Mac due to mortgage forbearance defaults, foreclosure moratorium losses and mortgage servicer compensation and other forbearance costs. These preliminary cost expectations are likely to be much higher than projected.

Despite these recent record low mortgage rates, there is growing concern by some bond market experts over a sudden rise in longer-term interest rates. Some believe that the easy money and extensive bail-out policies of the Jerome Powell-led Federal Reserve has the potential to cause The Fed to “lose control” of long-term interest rates. As such, yields on the Benchmark 10-year Treasury-Note reached their highest levels since March 20, hitting 0.98 percent on Nov. 10. This is up from 0.62 percent on July 1 of this year, but still well below the 1.94 percent posted in November 2019. The Fed has recently expressed concerns about the likelihood of growing defaults on U.S. household debt due to COVID-19 related economic issues, so expect to see a lot of moving parts on multiple fronts as we move into the New Year.   

As of Nov. 10, there were 198 active condo listings in the Cape, ranging at list prices from $89,000 to $2 million, with only three condos listed for sale below $100,000. There was also one additional condo listed as a foreclosure at $220,000. The number of closed condo sales in Cape Coral should remain strong through the end of the year with a current  pipeline of 101 condos under contract with buyers as pending sales, most of which should be recorded as closed sales within the next 30 to 60 days. Also, based on the preliminary sales numbers for October, we will be registering a new all-time single month record for closed condo sales in the Cape. 

In the overall Cape Coral condo market, the monthly supply of unsold condos in September came in at 5 months, which was 16.67 percent lower than the 6 months of supply in September 2019, and even with the 5 months of supply in August of this year. In the third quarter, the level of overall unsold condo supply in the Cape averaged 5 months, which was down 16.67 percent versus the average supply of 6 months in the third quarter of 2019, and 42.33 percent below the average of 8.67 months of supply in the second quarter of this year. In the first nine months of 2020, the overall supply of unsold Cape Coral condos averaged 6.67 months, which was 4.71 percent less than the 7 months of supply over the first nine months of 2019. From the second quarter to the third quarter of this year, the overall condo market in the Cape has shifted from a neutral market to a lower inventory seller’s market, and the preliminary numbers for October are pointing towards an even tighter supply of condos available for buyers to choose from in the fourth quarter of this year. 

Gulf access canal condos

In the Cape Coral gulf access canal condo segment, the monthly supply of unsold condos in September came in at 4 months, which was 50 percent lower than the 8 months of supply in September 2019, and even with the 4 months of supply in August of this year. In the third quarter, the level of unsold condo supply in this segment averaged 4 months, which was down 45.43 percent versus the average supply of 7.33 months in the third quarter of 2019, and 51.98 percent below the average of 8.33 months of supply in the second quarter of this year. In the first nine months of 2020, the supply of unsold Cape Coral gulf access canal condos averaged 6.33 months, which was 28.72 percent below the average of 8.88 months of supply over the first nine months of 2019. This segment is currently in a lower inventory seller’s market, with the preliminary October supply numbers set to move even lower.

Sailboat access canal condos

In the Cape Coral sailboat access canal condo segment, which is a subgroup of gulf access condos, the monthly supply of unsold condos in September came in at 4 months, which was 66.67 percent lower than the 12 months of supply in September 2019, and even with the 4 months of supply in August of this year. In the third quarter, the level of unsold condo supply in this segment averaged 4.67 months, which was 53.3 percent lower than the average supply of 10 months in the third quarter of 2019, and 57.55 percent below the average of 11 months of supply in the second quarter of this year. In the first nine months of 2020, the supply of unsold Cape Coral sailboat access canal condos averaged 7.66 months, which was 28.88 percent below the average of 10.77 months of supply over the first nine months of 2019. This shifts the sailboat access canal condo segment from being in the higher end of a neutral market range in the second quarter to being in a lower inventory seller’s market in the third quarter of this year, with the supply likely to tighten even more in the fourth quarter.  

Dry lot condos

In the Cape Coral dry lot (non-canal) condo segment, the monthly supply of unsold condos in September came in at 5 months, which was equal to the 5 months of supply in September 2019, and 37.5 percent less than the 8 months of supply in August of this year. In the third quarter, the level of unsold condo supply in this segment averaged 6.67 months, which was 42.83 percent higher than the average supply of 4.67 months in the third quarter of 2019, but 9 percent below the average of 7.33 months of supply in the second quarter of this year. In the first nine months of 2020, the supply of unsold Cape Coral dry lot condos averaged 6.78 months, which was 27.2 percent above the average of 5.33 months of supply over the first nine months of 2019. The dry lot condo segment is currently in a neutral market, although it appears to be poised to shift into more of a lower inventory seller’s market in the fourth quarter of this year.

(The sales data for this article was obtained from the Florida Realtors® Multiple Listing Service Matrix for Lee County, Fla., as of Nov. 1, 2020, along with outside sources including Freddie Mac and the FHFA. It was compiled by Bob and Geri Quinn and it includes information specifically for Cape Coral condominiums, townhouses and villas, and it does not include any data for single-family homes, foreclosures or short sales, unless otherwise noted. The data and statistics 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 41 years. Geri has been a full-time Realtor since 2005, and Bob joined Geri as a full-time Realtor in 2014. Their real estate practice is mainly focused on Cape Coral residential property and vacant lots.)