In Cape Coral, a boom gone sour
America's 'Little Venice' saw home prices double on speculation. Now, that trend has reversed.
Cape Coral, Fla.
In the face of a local housing crash, Leigh Strand is defiant.
The founder of Grill it Yourself Inc., she had a booming business a year ago helping Florida homeowners create outdoor kitchens and a barbecue lifestyle to match. Now, her shop is as quiet as the hundreds of nearby homes that stand empty with "for sale" signs planted out front. There are customers â€“ including some who have laid out big plans â€“ but hardly any are moving ahead with a major purchase.
Recently, "I had the choice between paying my mortgage or paying my employees," Mrs. Strand says. "I paid my employees.... I'm not giving up. I'm not going down."
Welcome to Cape Coral, where residents are banking on a combination of grit and the lure of local amenities to see them through a housing recession that's as bad as any in the US.
During four boom years, this sprawling waterfront community, known locally as America's "Little Venice" for its grid of man-made canals, saw home prices double. Much of the momentum came from speculators, who banked on a continued surge. Now, that trend has reversed.
Housing prices for Cape Coral and nearby Fort Myers have fallen 7.3 percent in a year, the seventh-worst decline in the nation, according to the National Association of Realtors. The area leads the nation in the pace of foreclosures: More than 1 in 20 mortgages here are now in the process of being taken over by a lender, according to First American's LoanPerformance in San Francisco.
If Cape Coral today shows the housing crisis near its worst, just how bad is it?
The good news is that even here, the economy hasn't followed the housing market into a crash. Cape Coral's unemployment rate has jumped 2 full percentage points this year, but it remains only slightly above the national average. And consumers still fill parking lots along Del Prado, one of Cape Coral's main commercial boulevards.
But what's happening here is testing the limits of the economy's resilience. The spillover effects in the Cape Coral/Fort Myers metro area are already evident:
â€¢In construction, the next year may see less than 1,000 new homes built, down from 8,500 a couple of years ago. "The economic engine for a long time was building new homes," says Mike Quaintance, president of the local Chamber of Commerce. "That's a significant revenue stream that is gone."
This means less work and lower pay for a range of workers, hitting the black and Hispanic population especially hard. Ralph James, picking up garbage at a construction site in Fort Myers, says work is available but at lower wages. He gets about $250 per week now, down from $400 or more that he could pull in a year or two ago.
â€¢Others have lost jobs. The soup kitchen serving Cape Coral now feeds about 250 families a day, up from 85 a year ago, says Sarah Owen, who heads the nonprofit operation.
"I'm seeing ... middle-class folks coming in who are on the brink of bankruptcy, losing their homes," she says. Many "are reaching out for the first time in their lives" for help.
â€¢For homeowners, falling land values can affect everyday spending. Brent Legere, a pizza house worker in Cape Coral, bought a $207,000 home last year. Currently, he figures it's worth much less than that, and a year from now he will see his adjustable mortgage payment reset.
"I was going to do some upgrades," he says, as he waits for customers. But now he's hoarding all the cash he can. "I might need it."
â€¢Those who bought properties as investments are feeling the pinch as well. Scott St. Blanc, who came to Fort Myers five years ago, gets income as landlord for three homes he owns here. In the current market, he's had to lower the fees for some tenants. "To keep them, I had to drop the rent to $1,200 from $1,400," he says.
He bought early in the boom, so unlike more recent buyers, he says the properties are still worth more than he paid.
What can offset the housing pinch?
Florida's popularity and good weather may limit how far home prices can fall. Cape Coral, a coastal wetland in 1958, became in recent years a magnet for retirees and "snowbirds," offering an attractive blend of amenities and affordable year-around and vacation homes, many of them sporting boat docks along the 400 miles of canals that offer access to the Gulf Coast.
Long-term, the area's demographic forecasts suggest continued demand for housing.
"I think there are a lot of fence-sitters," potential buyers waiting for the market to bottom out, says Wayne Falbey, an economist at Nova Southeastern University in Fort Lauderdale, Fla.
Local tourism is getting a boost as foreign travelers pounce on a weak US dollar. And those snowbirds are starting to descend from the north for their long winter stay.
"It'll get so busy that I can't get out" for lunch, predicts veteran retailer Toni Halvatzis, who runs a handbag and gift store called Carried Away. "They have the money to spend," she says. "Florida can't survive without them."
â€“ Mark Trumbull