Homing In | It’s not you, it’s the market! Sales slow, but green shoots appear
The phrase, “Hope springs eternal,” credited to Alexander Pope from a line in his 1732 poem titled, “An Essay on Man,” may be an apt description for our real estate market as we move deeper into the final month of 2023 and head into the new year. When we analyze the current market data and the anecdotal market information that we have been coming across, our message to the growing number of sellers trying to attract a buyer for their home is, “It’s not you, it’s the market!” Fortunately, there may be some green shoots beginning to sprout in the form of lower interest rates as we move into our traditional peak real estate season after the first of the year, however, the competition between sellers is also likely to intensify as more homes come onto the market.
We continue to come across a lot of conflicting data and opinions about the economy and the housing market, in what has been a slower year for our real estate market. This slowdown has been mostly driven by the actions of the Federal Reserve leading to sharply higher mortgage rates, with rising insurance costs and higher property taxes for non-homesteaded properties putting an additional inflationary squeeze on some homeowners. At the same time, based on various media reports, some parts of the country continue to have a shortage of available homes on the market and those areas with low inventories have continued to see fairly quick sales and firmer prices. However, that is not the case in our local market, where the supply of homes listed for sale continues to climb and prices continue to soften as we have shifted away from the crazy post-COVID seller’s market boom to the current higher inventory, slower buyer’s market of today.
On the bright side, recent economic reports are showing that the rate of inflation has continued to slow leading once again to renewed optimism that the Fed will begin lowering interest rates as early as in the first quarter of next year. In anticipation of the Fed’s potential policy reversal from its previously stated position of “higher rates for longer,” to what many experts are certain will become “lower rates much sooner,” mortgage rates have “plunged” from around 8% to below 7.2% in a time frame that amounts to the blink of an eye. This rate relief has the potential to start bringing more buyers back into the market right at the moment we enter our prime seasonal sales months, especially if mortgage rates continue dropping to levels below 7%.
But make no mistake, the Fed has been successful in slowing down the real estate market, which was one of its main targets in the war on inflation that began in earnest back in March 2022, when it started raising interest rates. A recent Bloomberg article written by Ethan M. Steinberg, titled, “Slowest Housing Market In Years Weighs On Consumer Spending,” sums things up nicely by pointing out that, “Plunging U.S. home sales are having a ripple effect on consumer spending, as fewer Americans are moving into houses that need to be outfitted with furniture and appliances. The effects are visible across the economy. Spending on furniture and related items fell nearly 12% from the year-earlier period in October.”
This article also pointed out that, “In October, mortgage rates reached their highest level since 2000, helping to make housing the least affordable since at least the 1980s.” They also touched on the fact that in recent housing market reports, “The effects of low affordability became even clearer: a gauge of pending sales for existing homes reached its lowest level since the measure started in 2001,” and stating, “it could take years for the housing market to return to normality.”
This Bloomberg article seems to reinforce our headline, “It’s not you, it’s the market,” that is aimed at the sellers in our market. Next week we will expand our conversation about some of the conflicting reports and anecdotal evidence we are seeing on the ground in our real estate market, but for now here are some updated Cape Coral market numbers.
As of Tuesday, Dec. 5, the number of active listings for Cape Coral single-family homes in the Multiple Listing Service has climbed to 2,459 homes available for sale on the market. The number of currently active listings is up 8.9% since Oct. 31, when there were 2,259 homes on the market in the Cape, and it is 85.4% higher than the 1,326 active listings from one year ago on Dec. 6, 2022. The current median list price came in at $499,990 based on our weekly market survey through the MLS, which was flat with the $500,000 median list price registered one year ago, but well below the high of $610,000 from back on April 19, 2022. The current price range for our active home listings is running from $266,000 to $11.9 million, with the second and third highest-priced listings coming at $6.5 million and $4.75 million, respectively. One year ago the prices for active listings in the Cape ranged from $225,000 to $4,999,999 as our market was making a comeback from Hurricane Ian. In this week’s market survey, 985 of the 2,459 homes listed for sale in the MLS were priced at $450,000 and under, with 305 Cape Coral homes now on the market at $1 million and above. One year ago, 537 of the 1,326 homes listed for sale in the MLS were at $450,000 and under, with 140 homes at $1 million and above.
The number of homes under contract with buyers as pending sales has continued its recent decline, dipping to 500 pending sales in the pipeline on Tuesday, Dec. 5, from 588 pending sales on Oct. 31. The price range for our current pending sales is running from $199,000 to $1.999 million with a median pending sales price of $399,900. A total of 200 of the current 500 pending sales, or 40% of the market, are new construction homes built in 2023, creating stiff competition to many of the older, existing homes on the market. About 70% of the pending sales in the pipeline are for homes priced at $450,000 and under, with only 18 homes under contract with buyers at $1 million and above. One year ago, there were 555 Cape Coral homes under contract at prices ranging from $170,000 to $1,699,900.
The preliminary market numbers for the month of November are coming in on the weak side, with the number of closed home sales in the Cape on track to be the second worst month of the year. They will finish above the low of 326 sales set in January of this year, but most likely somewhere below the 371 sales registered in October. The preliminary median sales price for November looks like it could be the low month of the year so far, along with being the third sub-$400,000 month in 2023. The category for months of inventory in November, along with the median days to sell both look like they will hit their high water marks for the year, while the leading daily market statistic continues to be the number of price reductions being made by sellers, as list prices also remain under downward pressure.
The sales data for this article was obtained from the Florida Realtors Multiple Listing Service Matrix for Lee County, Fla., as of Dec. 5, 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 44 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.