Geri and Bob Quinn

Technically speaking, we are still in a lower inventory seller’s market for single-family homes in Cape Coral, however, it appears that our market conditions are in the early stages of shifting towards more of a neutral, or balanced market. Although we are not there yet, we are identifying this as a developing market shift based on the increase in the number of available active listings for homes through a Realtor in the Multiple Listing Service. Just from May 1-31, we have seen that the number of single-family homes listed for sale in the Cape has increased by 32.7 percent from 624 listings to 828 listings. During this time frame, the median list price has drifted 4.3 percent lower from $595,750 on May 1, to $570,000 on May 31, while the pipeline of pending home sales has decreased by 5.5 percent, going from 987 homes under contract to 933 homes under contract.

Taking a closer look at the numbers, of the 828 currently active Cape Coral single-family homes listed for sale in the MLS, a total of 130 of these listings are priced at $400,000 and below, with only four homes priced under $300,000. Overall, list prices are ranging from a low of $259,900 to a high of $5.995 million. There are currently a total of 155 homes listed at $1 million and above, which is an increase of 52 percent from the 102 homes listed at $1 million and up from back on April 26, and it is 103.9 percent higher than the 76 such listings on March 15 of this year. Of the 933 homes under contract with a buyer in the pending sales pipeline in the Cape, 376 of them are pending at $400,000 and below, including 32 homes under contract for less than $300,000. A total of 44 homes are pending at prices of $1 million and above. Keep in mind that this is just a snapshot of the market at a given point in time, and that these numbers are constantly changing throughout the day.

By comparison, a year ago on June 1, 2021, there were only 381 active single-family home listings through a Realtor in the Cape at asking prices ranging from $199,750 to $5.995 million. Of these 381 active listings from a year ago, 65 of them were listed for $300,000 and under, while 51 were priced at $1 million and above. At that time, there were 1,096 homes under contract with buyers as pending sales.

So when we look at this listing data over the past several months and for the past year, it is becoming obvious that our market is in the midst of a shift to a higher level of inventory. If there is a continued follow-through in this rapidly developing shift from a seller’s market to something resembling more of a neutral market, we will likely see the number of active listings continue to rise as pending and closed sales level off or decline. As we have discussed in recent columns, a leveling off to a more “normal” market from what has been an abnormally scorching hot, record breaking market will probably feel like a fairly significant slowdown. In simple terms, if this shift continues to play out, sellers will start losing what has been their huge advantage over buyers when it comes to setting and negotiating the sales price and terms of the sale.

Anecdotally, we have already been seeing this occurring in the market as some aggressively priced homes that were receiving multiple full-price or higher offers three months ago are now sitting on the market longer. We have also been seeing a growing number of buyers making offers at what in the past would have been considered to be a level that was “reasonably” below the list price and then holding their ground on how much they will pay for a home. Some sellers are having trouble adjusting their thought process to this latest market reality, while it is starting to force other sellers to make price reductions in order to attract an offer. This is something that has been virtually unheard of over the past several years.

So far, this developing market shift and the leveling out in the number of closed home sales has yet to have been reflected in the results for median home sales prices, which were still at record levels in April. This is most likely a function of the fact that the real estate market is an opaque market where home sale prices are not tracked in real time which creates a lagging effect in the sales data by a month or two. A good example of this lagging effect is illustrated by the well-known Case-Shiller 20-City Composite Home Price Index, which just this week reported its most recent results showing that home prices in their index “surged higher” – in the month of March. In the current situation where the dynamics in both the economy and the housing market have become a lot more complicated since March, it would be fair to say that the data in the most recent Case-Shiller report is probably a bit stale and outdated.

Another potential flaw to the opaque nature of real estate pricing, especially in a shifting market, is the fact that setting the listing price on a home is largely based on the experience, knowledge, motivation, opinions and biases of the real estate agent and the seller. Unlike the stock market, or the crypto currency market, which utilize up-to-the-second pricing mechanisms enabling one to simply push a button to buy or sell immediately in real time, determining an accurate list price for a home based on sales data from the past three to six months on individually unique properties can be pretty much hit or miss. This is especially true when market conditions are shifting, rendering the past market data almost useless. This process is relatively easy for sellers in a hot market filled with a steady stream of overly eager buyers lined up at the curb and with sales prices surprising on the upside, but not so much so in a softening market with a shrinking pool of qualified, and more hesitant buyers.

We will wrap up with the most recent real estate market update from the FAU and FIU professors, Ken H. Johnson and Eli Beracha, respectively, which lists the 100 most overvalued housing markets in the U.S. As of their April 30, 2022 report, they now show the Fort Myers Metro Area has moved up to the eighth most overvalued market in the country from 11th place on March 31. Their research shows that prices in our metro area are now running at a 56.26 percent premium to the long-term expected price trend line in our market, which continues to place us in the number one spot in the state of Florida. This was up from its estimate that our metro area was overvalued by 50.8 percent on March 31. As we pointed out several weeks ago, for what it is worth, we are still well below our 90.72 percent overvalued premium level for prices from back on July 31, 2006. According to recent statements, the professors have said they do not think we are in for another real estate crash like we witnessed during the Great Recession.

This is the general theme for the housing market from some other well-known real estate experts, however, there are a number of other analysts and pundits predicting that the housing market is in a bubble that is about to burst. We will share some of these views and opinions in our upcoming columns.

The sales data for this article was obtained from the Florida Realtors Multiple Listing Service Matrix for Lee County, Fla., as of May 31, 2022, unless otherwise noted. 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 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 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.