Dave Diaz notices the telltale signs when he pulls up to the house in his GMC pickup. A soggy work permit rots in a display case. A coffee cup and a Pepsi can sit on a wall, abandoned, as if workers had fled to find cover in a storm. The home, like one every block or two in this Southwest Florida neighborhood called Gator Circle, is unfinished.
Diaz, a builder, works here in Cape Coral, a city of 230,000 with a once-hot real estate market that’s gone cold. Cheap financing and a burst of real estate buying during the Covid pandemic drove the boom. At the same time, a new kind of lending let regular people—doctors and physical therapists alike—invest in homes. “The whole world had come here to profiteer,” Diaz says.
The strategy was straightforward: buy a vacant lot for, say, $50,000 in cash and borrow hundreds of thousands to build a home. Then flip the property to another buyer for a quick profit, or rent it out for the long term. Alongside the inevitable obstacles, such as cost overruns and overwhelmed contractors, there was a bigger problem: The market soured because of a spike in interest rates and insurance costs in a storm-tossed region…