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Cape’s April housing market establishing a new equilibrium

By BOB and GERI QUINN - Homing In | May 4, 2023

Bob and Geri Quinn

Based on the preliminary sales results for single-family homes in Cape Coral during the month of April, we seem to finally be settling into our new market equilibrium after adjusting to last year’s sharp interest rate increases by the Federal Reserve and the devastating impact from Hurricane Ian.

Looking back, the fuse was lit on our real estate market boom after Florida started to reopen from the COVID lockdowns around May 4, 2020, with the new boom officially showing up in our market statistics in July 2020. From that point forward our real estate market turned red hot until the wild run in home sales and prices came to a rather abrupt end during the second quarter of 2022. This ending, which we first mentioned in this column as a noticeable change in buyer attitudes in April and May of last year, just happened to coincide with the beginning of one of the most aggressive interest rate hiking campaigns in the history of the Federal Reserve. To a large extent, the housing market slowdown that was initiated by the Fed with its first in a series of rapid interest rate hikes in March of last year, was finished off by Hurricane Ian on Sept. 28.

But before we get into the numbers, we would like to expand on our thoughts about this new market equilibrium and where things may go from here. Basically, our market has remained resilient as it has bounced off of the post-Hurricane Ian lows that were set in the fourth quarter of last year.

We have reached the point where the number of closed home sales in the first four months of 2023 is more in line with what we experienced in our “normal” market during the first four months of 2018 through 2020, and nothing like the abnormally “insane” market numbers from July 2020 through June 2022. We continue to see an increase in the inventory of homes listed for sale and we are seeing some early signs that the number of pending sales may be topping out and softening a bit, in a return to something more aligned with our historical summer and fall seasonal slowdowns. That said, there remains a strong interest in our market from out-of-town buyers setting up online home searches for Cape Coral and the national statistics still indicate a large influx of people moving to Florida.

Regarding home values, our overall median home sale prices in the Cape have paused at a level below the peak price reached in April 2022, but above the post-Hurricane Ian lows. Current median sales prices are also holding at levels that are well above the highest prices that were reached throughout all of 2021, and at prices that are higher than every year before that.

Some of the downward pressure we are seeing on median sales prices and median list prices are likely due to the continued “as is” clearance sale prices on storm-damaged homes, which is skewing home prices a bit lower than normal. Right now we seem to be experiencing what we would describe as a “soft landing” in our market with somewhat lower prices moving in more of a sideways, range-bound consolidation of the price gains from the past several years. If this trend continues for a period of time it would be a much healthier alternative to potentially lower prices generated through a “hard landing.”

The wildcards to how the real estate market plays out from here would seem to be in the hands of the Federal Reserve and how it handles interest rates and inflation. Its upcoming policy moves, along with the changing policies and spending by the politicians in Washington, will play a major role in the direction of the economy, the job market, the banking crisis, a looming debt crisis and credit crunch, and the potential for a recession. Geopolitical risks from around the world also have the potential to cause a shock to the economy. All of these factors, which are out of our control, could influence our market.

For our first look at our new market equilibrium, we will begin with the number of closed sales for the overall Cape Coral single-family home market in the first four months of this year versus prior years. Remember that closed sales come about from homes that, in most cases, went under contract with buyers as pending sales sometime within the previous 30 to 60 days. Based on the preliminary sales numbers for this April (taken as of May 1, 2023), there were a total of 1,646 closed home sales in the Cape in the first four months of this year. In the first four months of 2020, there were 1,677 closed home sales (note: we will likely match or exceed this amount when our 2023 numbers for the month of April are “finalized” over the next several weeks). By comparison, in the January through April time periods of the market boom years of 2021 and 2022, there were a record total of 2,316 and 2,263 closed sales, respectively. Going back to 2018, there were 1,712 closed home sales in the first four months of that year, which was up from 1,489 sales in 2017. The number of closed sales in the first four months of 2019 came in at 1,584 sales, dipping below the number of sales in 2018 due to the continued fallout from the toxic blue green algae water quality crisis in the river and canals during the summer and fall of 2018. So in a nutshell, we have now moved back to our normal pace of home sales from prior to the COVID market boom.

Next, here is an update on active listings and pending sales based on our weekly market surveys. Over the past two weeks we have seen some subtle shifts with the number of active listings in the MLS for Cape Coral single-family homes increasing by 3.7% from 1,468 listings on April 18, to 1,523 listings on May 2. Currently, list prices are ranging from a low of $215,000 for a storm-damaged home being sold “as is,” to a high list price of $3.995 million. The second lowest list price for a home in the Cape was at $249,900 and the median list price was at $535,000 on May 2, which was unchanged from two weeks ago. We currently have 219 homes in the Cape listed for $1 million and above, with a total of 531 homes at the other end of the spectrum listed at $450,000 and under, including 13 homes priced below $300,000. Of note, the number of active listings is up from 1,330 back on Jan. 3 of this year, and up 172.5% from the 559 active listings through a Realtor back on April 26, 2022.

During this same time frame from April 18 to May 2 of this year, the number of homes under contract with buyers as pending sales has decreased by 4.4% from 925 to 884, and the median pending sales price dipped from $415,000 to $410,000. Of the 884 pending sales, a total of 553 homes, or 62.6% of the pending sales, were at $450,000 and under, with 35 of these homes priced below $300,000. There are currently 41 homes in the Cape pending at $1 million and above. Back on Jan. 3 of this year there were only 522 pending home sales in the pipeline, so pending sales are up 69% this year, but they are running 13% below the 1,016 pending sales from one year ago.

We will continue with our look at the new market equilibrium next week, with some comparisons of median sales prices and days on the market, which should be helpful in setting realistic expectations of anyone looking to sell their home in our current market.

The sales data for this article was obtained from the Florida Realtors Multiple Listing Service Matrix for Lee County, Fla., as of May 1, 2023, 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 43 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.