Lee County Market Update August 2022
Lee County Market Update
Click here to watch Mike's Lee County Market Update for the month of August!
The real estate market is shifting, home prices are softening, and high interest rates compared to 6 months ago!
The reality is we are actually shifting more towards a normal and balanced market; however there are a lot of people who have never experienced that. If you haven’t participated in the real estate market prior to 2012, whether as a buyer, a seller of real estate, or even as a real estate agent for that matter, you probably haven’t even experienced what we call a more normal and balanced market. This is the reality of what’s happening right now and we are having to make those adjustments with higher interest rate environments in a market that’s softening a little bit, so this month we’re going to speak to some of those points and will go ahead and kick off with the sales report for Lee County.
First, we’re going to look at our sold report and give an idea of how many homes are selling each month, and I’ll circle this for you in red. There were 493 properties that closed last month in Cape Coral in the month of July. Now that’s down roughly 18% compared to July of last year, when 605 home sales had closed escrow. In Fort Myers, 202 homes sold in July compared to 306 the previous July, giving us a percentage difference of 34%. Now last year we were still selling to some of those pandemic-related buyers, and at this point that’s all but evaporated and now we’re back to a more normal balance market with Buyer demand that’s more relative to housing units that are available and of course the interest rates.
The next thing to look at is our active inventory report. This report reflects how many homes are for sale on the market and right now there are currently 1,427 properties for sale in Cape Coral. That's up roughly 3 times compared to last year, when there were 502 for sale. In Fort Myers we currently have 354 properties that are for sale and that’s up roughly 59% compared to last year when there were 209 properties for sale in Fort Myers. So our inventories have been trending up.
With this data we can calculate the absorption rate. The absorption rate is simply the amount of homes that are for sale and how long it would take to sell off the existing inventory if nothing else came up for sale. So currently our absorption rate is sitting at a 2.9 month supply, and to give you some perspective, last year it was at roughly a 0.8 month supply. So obviously we are trending up, the inventory overall relative to the demand is growing, so right now we are sitting at what we call the tail end of a sellers market.
A sellers market is typically anywhere from 0 to 3 month supply of homes for sale. A 4 to 5 month supply is considered more of a neutral market. Anything that is six months or more is considered a buyers market right now; again we are at 2.9 month supply. Because we are at the tail end of a sellers market and we are starting to see the inventories grow, we are starting to see pricing soften a little bit and experiencing in some cases price reductions in the market. All of which, going back to the beginning of this video, is what you see in a normal balanced market.
The last piece we will talk about today is mortgage interest rates. Currently, mortgage interest rates for FHA loans are in the high 4's and for conventional loans they are running in the low 5's. Now, that’s up from the beginning of this year, when interest rates were averaging 3.25%. For every 1% that mortgage rate increases, it diminishes a buyer's purchasing power by up to 10% when they’re getting financing. So when rates go up, it has an impact on what a buyer qualifies for, and a large part of what we’re seeing play out in the market right now, is the reality of higher interest rates, but there is a silver lining if I were to just go back over the last several weeks up to about a month ago, rates were at a higher of 6.5%. They’ve already come back down to about 5%. It’s still higher than it was before and is still having an impact on buyer demand. The fact that rates are not going up higher than 6.5% and starting to come back down a little bit is a very positive sign for the local market. So in any case, if you have any other questions regarding the real estate market here in Lee County Florida, just know we’re always here to help. I want to thank you all for taking the time to watch this video today and I’ll see you soon.