Few states have been hit harder than Florida by the housing collapse and foreclosure crisis. This problem is made worse in Florida because so many properties there are in maintenance-provided communities and homeowners associations. When many of the homeowners are no longer paying association dues because of bankruptcy or foreclosure, the communities struggle to maintain basic repairs and services. This presents challenges and hazards for home buyers in these markets. For a more in depth examination of the issues, read Linda’s articles “Homes Association Perils for Buyers” and “Cautions for Buying a Retirement Home”.
Cape Coral and Port Charlotte in southwest Florida have both been newsmakers in the last couple of years. Port Charlotte was listed as the best place to retire in the U.S. by CNN Money. Cape Coral has been referred to as a prime example of the foreclosure crisis in Florida. We wondered how each of these cities, only 30 miles apart, has earned its reputation, so we visited both to get some answers.
Port Charlotte is a laid-back small city that seems to enjoy lower housing costs because of the recession (prices down 63% since 2005), but ample amenities to make it a great place to live. Homes are generally older and less flashy than, say, Punta Gorda, across the harbor, but many are on canals and waterways leading to deep water in the harbor. In fact, Port Charlotte offers plenty of aquatic recreational options, great bird watching, and terrific parks and preserves, as well as a Cultural Center and first-rate medical facilities. As we drove around, we felt like Port Charlotte was not far removed from the small-town ambience it enjoyed a couple decades ago.
Next we look at Cape Coral, just across the Caloosahatchee River from its better known and more populous neighbor, Fort Myers. “The Cape,” as it’s known to local residents, has three times the population of Port Charlotte. A big part of its appeal is its proximity to Fort Myers and its prime tourist attractions of Sanibel and Captiva Islands and Fort Myers Beach. The Cape is a self-governing city with its own police department. It had been extensively planned for growth; ironically, this fact contributed to the housing bust and foreclosure crisis that has blighted the town.
When the inflationary bubble began midway through the first decade of the new century, The Cape was a very hot development city. Plenty of land in the northern part of the city was undeveloped but already platted: ready for builders and developers. Builders could buy land and start building without the delays of getting community lots platted and approved. The competition among builders, low mortgage rates, and surging housing values fueled a huge housing boom in a very desirable area. $1000-down mortgages, relaxed credit requirements, and eager mortgage brokers put many people into homes they could never afford to own. It seemed anyone could afford to own a home, and soaring home values meant $1000 in equity was just a temporary concern.
When the nationwide housing meltdown began, suddenly homeowners with razor-thin mortgages were seriously upside down. The housing boom lurched to a stop in The Cape, as elsewhere; unfortunately, many of the upside down homes were owned by people employed by the construction industry. More problems surfaced, like the Chinese drywall issue. Demand for construction materials had been so high that imported drywall found its way into new homes. Developers were building so fast, they put in their own private utilities to get communities completed and sold quickly. The city of Cape Coral rightly insisted that these home communities be part of the city utility grid. This resulted in assessments of up to $8,000 for some of the $1000-down buyers, and more chaos hit the market.
Meanwhile, thousands wanted to sell, but hurricanes and sinking demand shut down the buyer pipeline. Foreclosures skyrocketed as upside down owners bailed. The Cape became an epicenter of the foreclosure crisis. When we visited in April of 2010, we could not help noticing the colorful foreclosure tour buses still taking bargain seeking buyers and investors to see the multitude of foreclosed homes.
Lest you think Cape Coral is forever doomed, I’m happy to say it’s not. We saw a city that is working to come back; it did not look or feel like a city in decline. The longtime residents are fond of “The Cape” and optimistic about the future. For instance, the crime rate has been in a dramatic decline for two years in a row. Tourism is thriving; in fact, when we were there (mid-April), the area was experiencing what they described as a “second season.” Traffic was still at high season volume, beaches were busy, and snowbirds were just beginning to go back north for the summer. We had dinner at a restaurant on the water in a new upscale shopping and residential development.
As the housing crisis shakes out over the next few years, we can see The Cape once again welcoming more new residents–this time with more financial stability. The crisis has taught many a painful real estate lesson. It’s really a nice area for retirement in warm and sunny Florida.
Acknowledgement – Thanks to James Williamson, a Cape Coral realtor and long-time resident. He spent time during an open house talking to us about the housing and foreclosure problems facing The Cape and many other cities across Florida. We found him to be a helpful and knowledgeable resource. You can contact him at James@CapeCoralHomeTeam.net or by phone 239-699-1471 for real estate information in the Cape Coral area.
