It's the sun-soaked pandemic boomtown where thousands moved in. Now house prices are sinking fast... and experts warn crisis is spreading

It was a haven for pandemic-era homebuyers in search of affordable waterfront living.

Cape Coral, located about three hours west of Miami, is a Florida community known for its network of man-made canals and a sprawling nature preserve. 

It was long considered a more affordable alternative to cities like Tampa and Orlando, and in 2020, it drew middle-income families in droves. 

Today, the dream is over and the Cape Coral-Fort Myers region is the biggest loser in a housing wipeout that's seen median home sale prices decline in around one-third of major US cities this year.

Home prices in the Cape Coral-Fort Myers area peaked in early 2023, according to the Federal Reserve Bank of St Louis. By the first quarter of 2026, median home sale prices had fallen a whopping 9 percent to $341,250 year over year.

Cape Coral has plenty of company. Earlier this year, median home sale prices dipped in 39 out of the largest 129 US cities, according to a report from real estate data company ATTOM.

Real estate experts point to higher mortgage rates, rising property taxes, soaring homeowners' insurance premiums and an excess supply of homes as factors that are weighing on demand and pushing prices down.

Florida has been severely impacted. 'Florida's market went from one of the hottest housing booms in modern history to a market that is finally normalizing,' Jon Brooks, co-founder of Momentum Realty, told the Daily Mail.

'The problem is prices, taxes, insurance and monthly payments rose much faster than local incomes. That created a market where demand eventually had to slow.' 

The housing market became one of the biggest winners during the Covid-era migration wave. 

Markets like Cape Coral and Fort Myers exploded, Brooks said, because they offered relative affordability while still delivering the 'Florida lifestyle' buyers wanted.

With ample opportunities for remote work during the pandemic, prices in Florida rose far beyond what local wages would support.

'Builders and investors accelerated supply at the exact moment affordability started breaking down,' Brooks told us. 

'Buyers today have leverage again, and sellers are realizing this is no longer the 2021 market.'

Bob Miller of Millshire Realty agreed, saying that during the pandemic, low interest rates and investor activity caused a sharp increase in home values.

'Cape Coral is a perfect example of what happens when prices rise faster than fundamentals,' Miller told the Daily Mail. 

Today, higher mortgage rates, rising insurance costs, increased inventory and added condo fees are putting downward pressure on prices.

Ten Florida communities top the list of the US cities with the steepest condo price drops. The worst market is Cape Coral, where condo prices fell a staggering 33 percent since their peak in 2022.

Meanwhile, homeowners in Florida have some of the highest insurance rates of any state.

Data from the Coalition for an Insurable Future says premiums shot up 75 percent for Floridians between 2021 and 2025, far higher than the national average of 38 percent.

That's mostly because the Sunshine State experiences dangerous flooding and hurricanes more frequently than other states.

Premiums are at their highest in the southern part of Florida, where severe weather threatens high concentrations of expensive homes, an Insurify analyst told CBS News.

Brooks noted the housing collapse is only hurting some areas in Florida, while others are thriving.

In prime coastal Florida cities, luxury properties are still seeing an influx of demand as buyers flee high-cost states like New York, New Jersey and California. 

Florida has no state income tax, which makes it especially appealing to billionaires and business owners.   

'This isn't just a Florida issue,' Miller told us. 'We're seeing similar corrections in markets that experienced some of the fastest appreciation during the housing boom.'

Take the Lone Star State, for example. 

Austin, Texas, had one of the fastest-growing housing cycles in the country during Covid. 

When tech workers started moving to the city, developers responded with frantic apartment construction.

Brooks noted that this led to fresh supply hitting the market just as demand slowed. 

As demand waned, owners were left with luxury condos that were dropping drastically in value.

'The largest corrections are generally happening in areas that saw the most speculative growth and the biggest construction booms during the pandemic years,' said Brooks.

Austin is now among four US metro areas that have 50 percent more homes on the market than pre-pandemic norms, Realtor.com reports.

'In the south, you have more sellers of new construction because of the building boom that happened during the pandemic, and fewer buyers because they are facing high insurance and property taxes on top of high mortgage rates,' Redfin chief economist Daryl Fairweather previously told the Daily Mail.

While today's buyers have 'more negotiating power' in those once-sought-after neighborhoods, they also have to factor in added costs like higher mortgage rates, insurance, taxes and HOA fees.