Necessity is the mother of invention, they say. So if that's true, then 40 months–yes, four-and-a-third years–of for-sale new- and existing-home inventory is about all the necessity housing's topsy-turvy world can handle. Which begs the question, where's the invention in Fort Myers? High-volume home builders who ply their trade in the Lee County, Fla., market of around 600,000 residents had better hope they're somehow tied into the outsized genius, inventiveness, and a fair amount of the luck two of the Caloosahatchee River area's most noted citizens–Thomas Alva Edison and Henry Ford–made their names for almost a century ago.

Even in an environment where weak national-housing trends continue to make for sensationalized business headlines, and where seven months of national standing new-home inventory signifies one of the worst downturn cycles in two decades, Fort Myers stands out as one of the nation's goriest and most concerning turnabouts.

MAIN ATTRACTION: Sanibel Island, a paradisal beach spot, represents the Fort Myers' markets coastal appeal in spite of the current housing's oversupply. Photo: Courtesy Lee County Visitor & Convention Bureau Fortunes that were made as median existing-home prices in the market galloped 150 percent in five years and average lot prices quantum leaped from ranges of $5,000 to $10,000 up to $60,000 to $80,000 from 2001?2005 are now precariously close to frittering away. Almost 20,000 new-home units stand available among more than 150 home builders' 350 communities of single-family, resort, attached, and condo products scattered among Lee County's 15 submarkets. Considering the area only created a little under 10,000 new jobs last year and is trending down in that category, the overbuild problem becomes clear.

Roughly that means about $5.4 billion worth of already-started new homes awaits sale, even as home buyer psychology remains in a deep freeze, the sub-prime and ARM reset fall-out begins to unfold, and affordability hurdles have wiped out the ability of three of every 10 prospective home buyers to ante up for homeownership in the market in the past five years.

With 30 percent to 40 percent of the market gone with the investor exodus and 30 percent of possible buyers currently priced out of the market, selling down the pile of existing homes, re-sales from speculators, and new homes is not going to be easy. All builders and sellers can do is hope that the allure of fair climes (God forbid a severe hurricane season for the next couple of years!), genteel living, white-sandy beaches, cross-cut fairways and true-rolling greens, and positive local economic-development trends will one day almost magically reduce the pileup of excess inventory to some semblance of equilibrium.

What Happened?

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Market Absorption Chart

Snapshot: Fort Myers

Why has Fort Myers taken to behaving like the evil twin of its former self, which was a market overachiever for five years running until its inglorious dive? How come one public company after another calls particular attention to the "very difficult market conditions" in the Fort Myers/Naples markets in earnings calls and business forecasts, as they announce multimillion dollar write-downs to walk away from optioned land, and impair owned land that they acquired so covetously what seemed like only a few months earlier? What do the once-vaunted names of local home building players acquired in 2005 and 2006–Colonial Homes, Greater Homes, First Home Builders of Florida, and Transeastern Homes–conjure today other than nightmares for the owners who plucked them up at top-of-the-market prices?

The biggest question, however, is how do we get out of this now that we've dug ourselves so deep a hole? Southwest Florida stands for what can and did go so insanely wrong when speculative real estate purchases are able to masquerade as genuine demand for homes, and when national, public builders crowd in to make their play for the 4 percent to 7 percent market share in a hot market, and when affordability, for what it's worth, becomes an afterthought of market strategy.

And, although many of the characteristics of Lee County household, population, and economic growth differ dramatically from those of other formerly "hot" housing markets in other parts of the country, the area today may serve both as a cautionary tale of what never to do again (i.e., underestimate the pain associated with selling to 30 percent or 40 percent of investor buyers) and a litmus test of how well-prepared nationals and big regional home builders are to endure a protracted, painful work-through period, and emerge to see another upturn in the market.

In flashes, fleeting and situational, the market has showed signs of life even amid the gloom. After a drop off the cliff from absorption rates of about 1,300 per month through 2006 to about half that in January 2007, marketplace sales figures for February and March will reveal that a number of builders have begun to crack the code of pricing to market, according to Raymond Yunker, executive vice president at Naples Realty Group Development.

Learn more about markets featured in this article: Cape Coral, FL.