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Year-end spike in unsold condo supply raises concerns

February 15, 2019
By BOB & GERI QUINN - Homing In , Cape Coral Daily Breeze

The beginning of this year is going to be marked by the constant drumbeat in the local media, as well as in the various marketing pieces put out by local real estate agents, that our real estate market has shifted dramatically into a buyer's market. One piece of evidence will be the large number of price reductions being made each week by sellers. The message will likely be that sellers need to "act now" to reduce their prices because it is now a buyers market. To be clear, there are growing signs that there has been a shift in our real estate market, but at this point, the takeaway should be that the one thing that has not changed is that if a home or condo is priced accurately to begin with, it will sell quickly.

This also ties into a fact we have been discussing repeatedly in this column for the past two years, which is that we have had a consistent shortage, or a very low inventory of "reasonably-priced" homes and condos for sale in our market. At the same time, we have had a very large inventory of overpriced homes and condos just stagnating on our market until those sellers make some fairly significant price reductions in order to attract a buyer. We have also stressed the importance of looking at each specific segment of our market separately, instead of in general, because the market conditions can vary widely in each segment, as noted below.

In the overall Cape Coral condominium market, the monthly supply of unsold condos averaged 6.75 months for the year in 2018, which was 1.2 percent above the average of 6.67 months of unsold supply for the year in 2017. However, we saw a larger than usual spike higher in the unsold supply of condos at the tail end of 2018, with the month of December coming in with 10 months of unsold supply, which was 100 percent higher than the 5 months of unsold supply in December 2017, and 25 percent above the 8 months of supply in November 2018. The pattern of a late year spike higher in unsold supply was also present in the quarterly numbers, as the fourth quarter of 2018 had an average unsold supply of 9 months, which was 42.18 percent higher than the 6.33 months posted in the fourth quarter of 2017, and 50 percent above the 6 months of unsold supply from the third quarter of last year. This has created a split in the overall Cape condo market, with the longer term yearly numbers indicating we are in more of a neutral market, while the higher than usual shorter term monthly and quarterly numbers are indicating we are in a higher inventory buyer's market. With the anticipated seasonal effect towards a higher supply of unsold condos for the next several months, we would place a heavier weighting on the shorter term numbers and consider the overall condo market to be in more of a buyer's market for now. This market shift may still be more of a temporary seasonal situation, but there is no doubt that the unsold supply numbers are at their highest level since 2013.

Gulf access condos

In the Cape Coral Gulf access canal condominium segment, the monthly supply of unsold condos averaged 9.08 months for the year in 2018, which was 4.73 percent above the average of 8.67 months of unsold supply for the year in 2017. As with the overall Cape condo market, there was also a larger than normal spike higher in the unsold supply of condos in this segment at the tail end of 2018, with the month of December coming in at 13 months of unsold supply, which was 62.5 percent higher than the 8 months of unsold supply in December 2017, and 44.44 percent above the 9 months of supply in November 2018. This same pattern of a late year spike higher in unsold supply was also present in the quarterly numbers, as the fourth quarter of 2018 had an average unsold supply of 12.33 months, which was 37 percent higher than the 9 months posted in the fourth quarter of 2017, and 19.36 percent above the 10.33 months of unsold supply from the third quarter of last year. The unsold supply average of 12.33 months in the fourth quarter of 2018 was the highest level since it averaged 16.67 months in the fourth quarter of 2010. Based on these supply, or inventory numbers, we would consider the Gulf access condo segment to be in a buyer's market.

Sailboat access condos

In the Cape Coral sailboat access canal condominium segment, which is a subgroup of Gulf access condos, the monthly supply of unsold condos averaged 10.58 months for the year in 2018, which was actually 3.11 percent lower than the average of 10.92 months of unsold supply for the year in 2017. Despite this slightly lower monthly average in the yearly total, the supply levels in this segment remain high with the same significant spike higher in the unsold supply at the tail end of 2018. The month of December came in at 13 months of unsold supply, which was 62.5 percent higher than the 8 months of unsold supply in December 2017, and 44.44 percent above the 9 months of supply in November 2018. This same pattern of a late year surge higher in unsold supply was also present in the quarterly numbers, as the fourth quarter of 2018 had an average unsold supply of 13.67 months, which was 57.67 percent higher than the 8.67 months posted in the fourth quarter of 2017, but only 2.55 percent above the 13.33 months of unsold supply from the third quarter of last year. The sailboat access condo segment had the highest fourth quarter average monthly supply of unsold condos since 2013, when it averaged 16 months, while the third quarter of 2018 was the highest total since it averaged 14 months of unsold supply back in 2012. The sailboat access condo segment remains firmly entrenched in a buyer's market.

Dry lot condos

By far, the best news regarding the monthly supply of unsold condos was in the Cape Coral dry lot (non-canal) condominium segment, where the monthly supply of unsold condos remained relatively low compared to the rest of our condo market. This segment averaged 5.08 months of unsold supply for the year in 2018, which was 4.69 percent lower than the average of 5.33 months of unsold supply for the year in 2017. This is the only condo segment in the Cape with an average annual monthly supply of unsold condos below 6 months, which would place it in a seller's market. When we factor in the spikes to a higher supply of unsold condos at the tail end of 2018, this segment is bordering on being in a neutral market, but based on the typical seasonal trends, this is likely to be a temporary tick higher. To that end, in the month of December, the unsold supply came in at 7 months in this segment, which was 75 percent higher than the 4 months of supply registered in December 017, but flat with the 7 months from November of last year. In the fourth quarter of 2018, the unsold supply of dry lot condos averaged 6.67 months, or 11.17 percent higher than the average of 6 months in the fourth quarter of 2017, but it was 81.74 percent above the average of 3.67 months of unsold supply from the third quarter of last year.

(The year-end and December 2018 sales data for this article was obtained from the Florida Realtors Multiple Listing Service Matrix for Lee County, Fla., as of Feb. 3, 2019. It was compiled by Bob and Geri Quinn and it includes information specifically for Cape Coral condominiums, villas and townhouses, and it does not include single-family homes, 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 39- ears. 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.)

 
 
 

 

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