Cape Coral signals a housing market crash, what is happening in this Florida city

Florida’s Cape Coral is currently sitting on the verge of one of the worst housing markets in all of America, and experts believe that the situation is likely to escalate further soon. This situation, caused by a sharp decline in home prices, has created turmoil in the real estate industry, with many experts calling it a precursor to the 2008 US financial crisis.

However, agents who spoke with HousingWire believe that the southwest Florida city is experiencing a natural market correction, and it cannot be called a collapse.

While the 2008 financial crisis occurred due to subprime mortgages, speculative buying, and a lack of oversight on the mortgage market, the situation in the Cape Coral housing market has been triggered mainly by high mortgage rates, rising inventory, and growing economic uncertainty at the national level.

What is happening in Cape Coral

The housing market in Cape Coral exploded during the COVID-19 pandemic, which began in 2020. This was the time when new people flocked to the city due to it being a comparatively affordable town in Florida. The homes that were up for sale were bought quickly, which drove up prices. According to Redfin, the median sale price of a home in the city rose from $239,020 to $436,475 between May 2020 and May 2022.

The median home sale price in the Cape Coral-Fort Myers metro area jumped nearly 75%, peaking at $441,000 during these two years. Following this surge, the area became one of the fastest appreciating housing markets in the country, which meant that a pullback was not only on the cards but also kind of inevitable.

The downturn begins

In 2023, when the market across the US witnessed a brief price correction, Cape Coral's housing market was on a downturn. In May 2023, the median sale price of a home had plunged by 5.3 percent in comparison to 2022 to $413,245.

In May 2024, it was down to $391,200, which is a drop of another 5.3 percent year-over-year. And in May 2025, the median sale price of a home in Cape Coral was down to $361,250, 7.7 percent less than a year earlier.

A recent article from The Wall Street Journal shed light on falling home prices, empty open houses, and investor pullbacks. An analysis of home prices in the Florida city conducted by Homes.com for America’s leading daily revealed that home prices in the Cape Coral metropolitan statistical area witnessed a drop of 11 percent in the two years through May. This is reportedly the most of any metro area in the country in that same period.

Reasons behind the downturn

The situation prevailing in the city is quite similar to the rest of Florida. One of the main reasons is the imbalance between buyers and sellers in Cape Coral. According to Parcl Labs, currently, Cape Coral has a record surplus of 10,049 units, a 525 percent growth since 2022, and an absorption rate of 0.268, which is lower than the country’s average of 0.423.

The company reported that Cape Coral has also reached "unprecedented levels" of price reduction activity, with 55.35 percent of listings cutting prices, much more than the 34 percent nationwide average.

In Florida, a steep rise in new developments triggered by the pandemic boom also added to the significant increase in the available stock of for-sale homes. In May 2025, the state had 234,288 homes for sale, an increase of 14.2 percent as compared to 2024, including 45,771 newly listed homes.

But listings are also rising because a smaller number of buyers are showing interest in the inventory due to long-standing affordability issues like high mortgage rates and rising costs. Another major reason behind the cooling down of demand across the Sunshine State is slow domestic migration, which is partially due to return-to-office orders across the US.

The challenges faced by Cape Coral are similar to those of the state, but the city also has some issues of its own. Hurricane Ian badly hit the city in September 2022, and its recovery has been strained by the other storms and flooding that followed that deadly event.

The growing frequency of natural disasters on the Southwest Florida coast has increased the cost of home insurance, while some carriers have cut coverage in the most at-risk areas of the state. According to MoneyGeek, home insurance in the Florida city costs an average of $640 per month, or $7,679 per year.

Originally posted at EconomicTimes