Geri and Bob Quinn

As pretty much anybody paying even the slightest bit of attention knows, the real estate market in Southwest Florida and throughout many parts of the U.S. has been scorching hot this year. We saw similar hot market conditions on a recent trip to Connecticut, and based on articles we have seen recently, real estate has even been booming in cities and towns in places such as Montana. The theme of wealthy Americans fleeing the social unrest, high taxes, homelessness issues and the out of control crime of big city life continues to drive real estate sales around the country.

The influx of people moving to Montana is resulting in many of the same issues we are seeing here. The limited supply of homes listed for sale on the market has been creating wild competition between buyers that is driving home prices higher, while creating affordability issues for the regular folks if they sell their homes and want to continue living in their towns.

Interestingly, as crazy hot as our local market has been, along with a lot of the U.S. real estate market, according to a recent report by Bloomberg Economics, countries such as New Zealand, Canada and Sweden rank as the world’s frothiest housing markets. The U.S., along with the United Kingdom, only rank near the top of this list based on Bloomberg’s criteria. This report goes on to state something that we are seeing in a rapidly growing number of media reports recently when they say, “Real estate prices around the world are flashing the kind of bubble warnings that haven’t been seen since the run-up to the 2008 financial crisis.” They then temper this bubble talk by commenting, “The trigger for a crash isn’t obvious,” and that, “The period ahead will more likely be characterized by cooling rather than collapsing.” So in their analysis, any “excess air” in the real estate market will be able to be eased out of any pricing bubbles through a “cooling,” rather than with a pop.

We’re not going to pretend that we know how this will all play out when it comes to the impact on the Cape Coral real estate market, but we thought we would provide some additional information about what we are reading, hearing and seeing firsthand on the ground as we go about our local real estate business. First, the number one question we receive from potential buyers and homeowners who are thinking about putting their homes up for sale is, “How long do we think this (rising prices, multiple offers, etc.) will last?” Although we are noticing a bit of a slowdown in the recent market activity that we track, which is probably a healthy thing for our market, we are still seeing strong buyer demand. As we will cover in greater detail next week, the number of closed single-family home sales in May is coming in lower than it was in April, but it is still at record levels and median sales prices remained strong. Maybe Bloomberg has it right with their “cooling rather than collapsing” analysis, but it is most likely way too early to make that call.

Regarding Bloomberg Economics’ statement that, “the trigger for a crash isn’t obvious,” there are a lot of market pundits, “experts” and economists who would disagree with that statement. The latest hot button trigger being debated by virtually everyone in the financial and political media deals with the potential negative impact to the economy from the out of control inflation numbers and the possible ramifications to the stock market and real estate market. Some argue that the increased inflation is not that bad and that it is largely the result of more of the economy opening back up from the COVID shutdowns. This group buys into the Jerome Powell-led Federal Reserve’s belief that this bout of inflation is “transitory” and it will settle back to more normal levels over the next several months. They argue that the recent action in lumber prices, which have fallen some 40 percent from the record high levels in the past month, is the perfect example that the Fed has it all under control.

On the other side of this inflation debate are the pundits who believe the Fed’s policies of manipulating interest rates through their various market interventions to keep interest rates on mortgages and savings accounts at, or near, record low levels has completely distorted market prices. This group believes the Fed has created the mother of all bubbles in the stock and housing markets, and that the current out-of-control inflation will be here a lot longer than anyone can imagine. They also cite the extreme and expanding record levels of government and corporate debt that the Fed’s monetary policies have enabled, which is likely to compound the future inflation problems. Just recently, Deutsche Bank, Bank of America and JP Morgan Chase are now openly stating that the Fed’s claims that we are experiencing “transitory inflation” are wrong. These banks are saying they believe we are facing an unprecedented period of far higher, non-transitory inflation, than the Fed thinks.

A third group of market experts and participants seem to have accepted the Fed’s ongoing market manipulations as a part of the normal way of doing business in the new abnormal world formed since COVID-19 burst onto the world stage. They seem to view the Fed’s “punchbowl policies” with a “more of everything” Roaring ’20s approach to life, believing the party in stock and home prices generated by the Fed’s actions will last forever.

At this point in time, the data is showing that inflation is growing at a much faster pace than wage growth, which, if it continues, could have a negative impact on the economy later this year. With the cost of just about everything we use on a daily basis increasing, recent reports are beginning to show that a number of middle class families are being squeezed financially to the point that it is already forcing some to make changes to their household budgets and put off making major purchases. Recent consumer confidence surveys by the Conference Board, which measures how optimistic or pessimistic consumers are regarding their expected financial situation, are indicating that Americans’ buying intentions six months from now have plummeted across the three major categories of homes, automobiles and major household appliances. This is leading some analysts to predict the economy will be far uglier six months from today.

One thing that is becoming clear is that there will be a lot of moving parts regarding inflation and its effects on the economy, the stock market, and the housing market going forward. The fact that we live in a desirable market that is very attractive to a lot of people who are looking to move here from less desirable areas of the country, could be a huge plus in putting a level of support underneath our market.

As of June 15, there were a total of 401 active single-family homes listed for sale through a Realtor in the Cape, which is up a bit from the 381 active listings on June 1. There are currently 1,002 homes under contract with buyers as pending sales, most of which should be finalized as closed sales within the next 30 to 60 days. The pendings are down 14.36 percent from the 1,170 in the pipeline on May 24. Foreclosure activity remains minimal.

The sales data for this article was obtained from the Florida Realtors® Multiple Listing Service Matrix for Lee County, Fla., as of June 15, 2021. It was compiled by Bob and Geri Quinn and it includes information specifically for Cape Coral single family homes, and does not include condominiums, short sales, or foreclosures, 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.