February 2023 Market Update
Lee County Market Update
Click here to watch Mike's Lee County Market Update, a review of what happened in the real estate market in February 2023!
Homes Sold in January
Just last month in Cape Coral, there were 339 homes sold and closed. Whereas a year ago in January 2022, 554 homes were sold. That's a nearly 40% decrease in the number of homes sold. In Fort Myers, there were 278 homes sold in January of 2023. And a year ago, January 2022, there were 395 homes sold, making it a 30% decrease in the number of sales. What these numbers mean is that we're returning to a balancing market. Buyer demand has actually begun to shift downward, which means that homes are staying on the market for a longer period of time, and we call that days on market. This is also affecting the sales price of homes. Back in January of 2022, homes were being priced according to the market, or what the market was telling sellers, and they were selling quickly because of high buyer demand. Well, in January 2023, sellers are still pricing their home as if the market was still at its all time peak. This is leading to longer days on the market, more room for negotiations, more price reductions, and ultimately less overall home sales.
Active Listings in January
So now let's shift gears and look at the next report that I'm going to pull up here, and that is our active listing report. This gives you an idea of how many homes are currently for sale at any given time in the market. We closed out January 2023 with 1,558 homes actively listed in Cape Coral and 846 actively listed in Fort Myers. In comparison to January, 2022, there's actually about three times the number of homes for sale now versus a year ago. So the fact reaffirms that the Southwest Florida real estate market is beginning to balance out.
This also shows us that buyers are beginning to be more selective about homes that they're purchasing. Back in 2022, buyers had little inventory. They were more willing to overlook important details when purchasing homes, such as waiving inspection rights or giving up on square footage. And now buyers have more selection available. They're being particular about the homes they're purchasing. This may lead sellers having to repair and stage their homes more to appeal to a wider range of buyers. Whereas in the past, sellers could sell their home with virtually no improvements and guarantee a sale.
Next, we'll discuss interest rates. According to Freddie Mac, the current interest rate for a 30 year fixed loan is 6.13%. As seen on the graph, this is actually the first time in a while that we've seen a significant steady decrease in interest rates. The peak was back in mid November, with an interest rate of just over 7%. So this may lead to a few changes in the real estate market because rates are still about double what they were a year ago. And this is one of the reasons we're starting to see a decrease in the number of homes sold. Historically, for every 1% interest rates go up, buyers purchasing power actually reduces by 10%. That means they cannot afford as much house as they could a year ago when the rates were in the low 3% range. Therefore, with interest rates rising by 3% over this last year, buyers purchasing power has actually dropped by 30%.
It's also important to note that this purchasing power is impacted by wages. If a buyer's wages remain the same, then the buyer can afford less home. The inverse is true if a buyer's wage increases along with the increasing interest rates, buyers can actually afford the same amount of home. This would also mean that sellers would be able to negotiate in terms of the sale price of their home. However, as we stated earlier, with buyers being more selective and homes having longer days on the market, the market is still balancing even though rates are decreasing.
Post Hurricane Ian
Before we close out this month's real estate market update, I want to discuss the continuous aftermath of Hurricane Ian. Many homeowners across Florida are still facing that difficult decision whether to rebuild their hurricane damaged home or to sell it as is. But one thing that's beginning to impact everyone who's had hurricane damage is insurance. Many homeowners are facing extremely high insurance rates across the board. According to NPR, Florida homeowner insurance rates are rising at an average of 33%, whereas the national average is 9% increase.
The main reason for the massive increase in insurance rates is actually because Hurricane Irma homeowners who suffered damage in the massive storm five years ago entered into many lawsuits with their insurance companies over the "Assignment of Benefits" clause. What that means is they happen to pair up attorneys with contractors after the hurricane and they partnered together to raise the rate of each service. Now those litigations are coming to the forefront. It's forcing insurance companies to raise their overall rates. Another side effect of these lawsuits is the two largest insurance companies, Allstate and State Farm, are no longer writing policies in the state of Florida.
This is making it extremely difficult for homeowners to have a proper and effective insurance policy written for their home. And if they can find an insurance company, the prices are extremely high.
Even with the continuing impacts of the hurricane, we are still seeing sales of homes that have damage. So whether you have water or wind damage, there has been a high volume of hurricane damaged homes selling. In fact, the local Real Estate board and Zillow have begun to specifically market hurricane damaged homes as they are in a different bracket than normal home resales.