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Vacant Cape lots and the painful road to just letting go

March 8, 2019
By BOB & GERI QUINN - Homing In , Cape Coral Daily Breeze

In a recent report by the World Population Review, Cape Coral is now ranked as the eighth largest city in the state of Florida, with an estimated population of 194,570 people, on the way to surpassing 200,000 full-time residents this year. According to the U.S, Census Bureau, our population was 154,305 on April 1, 2010, and it was 102,286 back in 2000, prior to the last major real estate boom. Having lived here for over 39 years, we were part of the 32,103 Cape Coral residents in 1980, so we have witnessed a lot of the changes associated with the growth in Southwest Florida. By comparison, the city of Fort Myers had a current estimated population of 87,019 on this same list by the World Population Review.

This population growth means we have a lot of new residents who have moved to our area since the last irrational real estate market boom and the subsequent market crash that led to the infamous "Great Recession." So today we thought we would rummage through some of the sales data on vacant residential lots which were bought during the boom years, to help illustrate what happens when a market reaches the point of insanity before crashing, and then eventually returning to a more rational pricing process. This will also help answer one of the more frequent questions we get from potential buyers about where real estate prices stand today versus in the boom years. We selected an area of vacant residential Gulf access canal lots located north of Pine Island Road and west of Burnt Store Road, and it did not take long to find multiple examples of how some of these vacant lot owners have decided to finally let go and sell their property at a loss.

The main takeaway about this story is how people got caught up buying vacant lots at rapidly rising prices during the market boom, then tried and failed to sell their lots at even higher prices, and eventually "chased" the market lower before making the fatal mistake deciding to wait for the market to make a comeback. Remember, this was a time when a lot of the "experts" were out there pontificating that people never lose money on real estate.

The first randomly selected vacant Gulf access residential lot on our list was located north of Embers Parkway, and the sale of this lot closed less than a month ago at a price of $83,000. The seller originally bought this lot for $150,000 back in August 2004, which was well before the market reached its peak. So more than 14 years after buying this lot, the seller sold it for a 44.67 percent loss of $67,000 before subtracting any seller-related expenses from the sales price. The buyer of this lot assumed an estimated balance of due of $19,308 for the Utility Expansion Project assessments on top of the purchase price. One of the interesting elements of this story, which was very common at the time, was that after purchasing the lot for $150,000 in 2004, this person listed it for sale at $429,000 in April 2006, before reducing the price to $379,900 in May 2006. They further reduced the list price to $295,000 in September 2006, and then down to $285,000 on Nov. 28, 2006, before dropping it to $240,000 on Dec. 13, 2006. After one more price cut to $234,900 in January 2007, they eventually tired of chasing the market lower, and threw in the towel by taking the lot off of the market on March 16, 2007.

Our next example is for a 16,945-square-foot oversized vacant Gulf access canal lot, which was also just a bit north of Embers Parkway, and it was sold for $174,000 on Dec. 21, 2018. The buyer will be assuming the assessments for the upcoming installation of city water, sewer and irrigation water. The seller bought this vacant lot for $259,900 in September 2004, so they sold it for a loss of 33.17 percent or $85,900 below what they bought the lot for, before subtracting any seller-related expenses. To help you gain a good understanding about the market conditions during the boom years, here is the sequence of sales on this lot beginning when it was purchased for $20,500 in February 1999. The next buyer bought this lot for $175,000 in September 2003, before selling it to the most recent seller, noted above, for $259,900. This owner then turned around and listed this lot for sale at $599,900 in September 2005, before reducing the price multiple times down to $325,000 in January 2007, until finally taking it off the market in June of 2007.

Our final vacant Gulf access canal lot is located south of Embers Parkway, and it was sold about a year ago, on March 6, 2018, for $91,000. This buyer also assumed a balance of over $20,000 on the recently installed city water, sewer, and irrigation water, as a part of the Utility Expansion Project, and there was a payment of $2,548 shown on the 2018 property tax bill made towards these utility assessments. The seller in this transaction bought this lot for $189,900 in August 2004, so they sold it for a loss of 52.08 percent or $98,900 below what they bought the lot for, before subtracting any seller-related expenses. According to the records, the sequence of prior sales on this lot indicate it was sold for $25,500 in August 2001, and sold again for $100,000 in June 2003, before this seller paid $189,900 for the lot. As with our other two case studies, this seller also tried to sell this lot for $399,900 in January 2006, before reducing the list price to $269,000 in October 2006. They then dropped the price to $165,000 in April 2007, before working their way progressively lower in price before finally giving up in April 2008, at $115,000. They came back on the market at $117,000 in January 2014, before eventually lowering their list price to $96,000 in January 2018, which led to getting the lot sold for $91,000 in March of last year.

One of the final takeaways of this story should be the lesson that when it seems really easy for virtually everyone to make "fast money" on a particular investment, it is usually a warning sign that things have reached the point of irrational exuberance. Unfortunately, this is also the point where markets typically scream to even higher levels before crashing, making it difficult to turn away from the greed and heed the warning signs that the end is near. Despite some slowing and flattening out in our real estate market over the past year, buyers have remained patient and rational, waiting for sellers to decide it is time to let go and move on.

(The sales data for this article was obtained from the Florida Realtors Multiple Listing Service Matrix for Lee County, Fla., as of March 4, 2019. It was compiled by Bob and Geri Quinn and it includes information specifically for Cape Coral vacant residential lots. 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 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.)



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