Geri and Bob Quinn

The monthly supply of unsold Cape Coral homes listed for sale in the Multiple Listing Service remains abnormally low, as our market faces a new challenge in the face of rising flood insurance rates. This plays into the rising levels of inflation we are already facing, along with continued product supply chain shortages, and the recent interest rate spike in the benchmark 10-year Treasury Note due to economic concerns. A growing number of “experts” are expressing concerns that the Jerome Powell-led Federal Reserve has boxed themselves into a corner that is more likely to end in something resembling a 1970’s-style Stagflation, and not the “transitory inflation” The Fed has been predicting. Only time will tell if we are facing a potential economic sea change or merely a tempest in a teapot. 

Barring an unlikely last-second reprieve, the Federal Emergency Management Agency, better known as FEMA, is implementing major price changes to its flood insurance policies that are a part of the National Flood Insurance Program (NFIP) policies. FEMA was supposed to begin implementing a series of gradual rate hikes to flood insurance policies about 10 years ago, which never happened, so after several recent close calls with insolvency, the rate hikes — referred to as the FEMA Risk Rating 2.0 — are coming all at once on new flood insurance policies issued as of Oct. 1, 2021. Phase two of these rate increases will hit already existing flood insurance policies that were in effect prior to Oct. 1, on their policy renewal dates beginning on April 1, 2022.

According to FEMA, it is expected that around 23 percent of existing flood insurance policies will actually see a price decrease under the Risk Rating 2.0 rate structure, while another 73 percent will see their annual flood insurance premiums increase by $120 to $240 next year. The maximum annual rate increase on existing NFIP policies is currently capped at 18 percent per year, so a smaller group of existing policy holders will see larger increases and it is expected that these rate increases will be a gradual multi-year process until the premium rates on existing policies catches up to the rates on newly issued flood insurance policies. 

For buyers needing a new flood insurance policy as of Oct. 1, the new rates are going to be steep compared to the old rates. We are hearing about premium quotes that were $600 per year under the old price structure that are coming in at $6,000 per year under the new price structure. Keep in mind, this is just for flood insurance, and does not include the cost of homeowners insurance. If the buyer is financing their purchase with a mortgage, lenders will be factoring in the higher flood insurance premium rates into the borrower’s debt to income ratio. So in the past, when a lender may have used an estimate of $1,800 per year for flood coverage when approving a loan application, now they are likely to use an estimate of $4,000 per year for flood insurance which could have a negative impact on some borrowers. 

The new flood insurance rates will apply to both the residential and commercial real estate markets, and the rates will be considered on a property-by-property basis, so your rates could be different from your neighbor’s rates. This will also impact any condo associations that have flood insurance, as their rates will increase beginning with policy renewal dates on or after April 1 of next year. This may lead to increases in condo association fees next year. 

If a seller has an existing FEMA NFIP policy, it can be assigned to a buyer, which could save the buyer a lot of money and help keep a sale together. This must be done prior to the closing. Also, if a seller has a flood elevation certificate it can be helpful to provide it to the buyer. For more details about these changes, contact your licensed property insurance agent. 

In the overall Cape Coral single family home market, the monthly supply of unsold homes came in at 3 months in August, which was 25 percent less than the 4 months of supply in August of 2020, and even with the 3 months of supply registered in July of this year. In the first eight months of 2021, the monthly level of unsold supply in the Cape’s overall single family home market also averaged 3 months, which was 44.2 percent less than the average of 5.38 months of unsold supply in the first eight months of 2020. 

Indirect gulf access canal homes

In the Cape Coral single family indirect gulf access canal home segment, which includes homes with at least one bridge for boaters to go under in the canal system, the monthly supply of unsold homes came in at 3 months in August. This was 25 percent less than the 4 months of unsold supply in August of 2020, and even with the 3 months of supply in this segment during July of this year. In the first eight months of 2021, the monthly level of unsold supply for indirect gulf access homes in the Cape has averaged 2.75 months, which was 60 percent below the average of 6.88 months of supply in the first eight months of 2020. 

Direct sailboat access canal homes

In the Cape’s single family direct sailboat access canal home segment, which is for homes without bridges in the canal system, the monthly supply of unsold homes was 3 months in August. This was 25 percent below the 4 months of unsold supply in this segment in both August of 2020, and in July of this year. In the first eight months of 2021, the monthly level of unsold supply in this segment averaged 2.88 months, which was 58.9 percent less than the average of 7 months of unsold supply in the first eight months of 2020. 

Freshwater canal homes

In the Cape Coral single family freshwater canal home segment, which consists of landlocked canals and lakes with no access to the river or the Gulf of Mexico by boat, the monthly supply of unsold homes came in at 4 months in August. This was 33.33 percent higher than the 3 months of unsold supply in August of 2020, and 100 percent above the 2 months of supply in July of this year. In the first eight months of 2021, the monthly level of unsold supply in this segment averaged 2.88 months, which was 49.9 percent less than the average of 5.75 months of unsold supply in the first eight months of 2020. 

Dry lot homes

In the Cape Coral single family dry lot (non-canal) home segment, the monthly supply of unsold homes was 3 months in August, which was 25 percent less than the 4 months of supply in August of 2020, and even with the 3 months of unsold supply in July of this year. In the first eight months of 2021, the monthly level of unsold supply in this segment averaged 3 months, which was 36.8 percent less than the average of 4.75 months of unsold supply in the first eight months of 2020. 

The sales data for this article was obtained from the Florida Realtors® Multiple Listing Service Matrix for Lee County, FL, as of September 19, 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. The flood insurance information was obtained from outside sources. 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 Quinn’s 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 42-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.