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Sticking with our theme from last week about the wide ranging list of "unknown unknowns" and potential unintended consequences throughout the world, this week we are going to touch on a variety of chaotic events which are likely to impact both the U.S. and global economies. We dubbed these high levels of volatility that are being driven by the current event news cycles surrounding just about everything in our lives as "KAOS," based on the 1960's television sitcom, "Get Smart."
As discussed last week, many of these problems have been building for quite some time, and have suddenly taken on even higher levels of KAOS since Russia invaded Ukraine. How this ultimately plays out for the Cape Coral real estate market depends on a lot of wildcards that are piling up on a rapidly growing list of unknown unknowns. We'll begin with our housing market.
Right now, we continue to see market KAOS between buyers competing with each other over the continued limited supply of homes available for sale in our market. Despite the tight supply, we have been fortunate enough to be generating just enough of a "just in time" inventory, in what we are referring to as a "next home up" market. Similar to the "next man up" sports analogy, where a championship caliber team has key players go down with injuries, only to be replaced by often unknown or forgotten back-up players who become the next man up on the roster, the next home up phenomena is driving the record number of closed home sales in the early stages of 2022. Basically, we seem to have just enough homes coming to the market to meet just enough of the excess out-of-town buyer demand, leaving the remaining pool of buyers even more determined to buy the next home up.
This is best illustrated through the current level of active single-family home listings through a Realtor in the Multiple Listing Service. As of early Tuesday morning March 15, there were 430 active home listings in the MLS at prices ranging from $265,000 to $5.995 million with the median list price coming in at $595,000. Of these 430 listings, there were a total of 31 homes listed for sale in the Cape at $350,000 and under, with only 7 of these homes priced below $300,000. At the other end of the spectrum, there were 76 homes in the Cape listed at $1.0 million and up. We currently have 1,034 pending sales in the pipeline, not including the eight additional pending sales that are short sales and foreclosures.
A week ago, on March 8, there were 433 active single-family homes listed for sale with 1,003 pending sales, while back on Feb. 22, there were 424 active listings with a median list price of $597,450 and a pipeline of 1,025 pending sales. So the number of active listings have been keeping pace by treading water as of late.
By comparison, back on March 24, 2021, there were 314 active listings of Cape Coral single-family homes in the MLS at prices ranging from $209,900 to $3.850 million and on Feb. 24, 2021, there were 354 active listings for single-family homes at prices ranging from $165,000 to $3.995 million. So our current just-in-time inventory is holding up a bit better than in 2021.
Last week we mentioned that issues with homeowners insurance in Florida, along with the new flood insurance rate structure, have the potential to create KAOS in our real estate market. We have personally seen situations where buyers have mortgage loan approvals from lenders who have not factored in the new, and often substantially higher costs of flood insurance into their loan ratios. When we made the buyers’ agent and the lender aware of the new flood insurance rate structure, some of the buyers no longer qualified for a loan on the home they wanted. As we have discussed in past columns, this has been for newly issued flood insurance policies since last October. But beginning in April, many homeowners and condo associations with existing flood insurance policies can expect to see large premium rate increases when their flood insurance policies come up for renewal. The impact on our real estate market of these higher flood insurance costs may be compounded by reports that a number of companies offering homeowners insurance are pulling out of the Florida market.
Aside from what is occurring in Ukraine, one of the biggest events occurring this week is the much anticipated meeting of the Federal Open Market Committee , where the Jerome Powell-led Federal Reserve is expected to raise the interest rate on the Federal Funds Rate. This major shift in monetary policy could ultimately prove to bring a new level of economic KAOS to our economy and the markets. We are writing this prior to the Fed's announcement on changes to interest rates and their bond buyback programs, but prior to this meeting Powell had already announced he would like to see a 0.25 percent rate increase at this time, as the Fed is being forced to deal with the out of control levels of inflation.
A number of experts believe the Fed is way behind the curve on this topic and that they need to shock the markets with a more aggressive rate hike. Others believe the Fed will still be able to ease their way to the nirvana of a "goldilocks" economy and a soft landing by gradually increasing interest rates. This group now seems to be "pricing in" a series of seven rate hikes of one-quarter of one percent each throughout the rest of this year.
We continue to see wild levels of KAOS with swings in the interest rates in the U.S. Treasury markets, and with oil and gasoline prices, along with food related commodity prices. The already high levels of inflation prior to Russia's invasion of Ukraine (we wrote about inflation being out of control in our column back on June 18, 2021) have spiked even higher due to the war. Fortunately, we may catch a temporary break with crude oil prices falling back below $100 per barrel this week from a high of around $130 per barrel last week. We say a temporary break for several reasons. First, as we have already seen, everything can change quickly based on the latest news about the war in Ukraine. And second, some of the decline in oil prices is likely due to the reported spike in COVID cases in China, which is leading to harsh lockdowns there and will likely threaten the supply chain for a variety of goods, thus increasing the risks of another global economic slowdown.
One other concerning unintended consequence of the sanctions against Russia are the recent reports that Saudi Arabia is considering accepting the Chinese Yuan for payment of Chinese oil purchases. The implications of this type of a financial end-around by countries avoiding use of the U.S. "petrodollars" for their purchases of oil, could prove to be devastating to our economy, as the number of unknown unknowns seem to be mounting.
The sales data for this article was obtained from the Florida Realtors Multiple Listing Service Matrix for Lee County, Fla., as of March 15, 2022, 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 42 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.