By Rob Sabo
High insurance costs and exorbitant homeowners association fees have potential condo buyers sitting on the sidelines, with sellers outnumbering buyers by just over 72 percent in August.
In an Oct. 6 report, online real estate platform Redfin said that nationwide, there were just under 260,000 condo sellers in August versus slightly more than 150,000 buyers—the fifth consecutive month that sellers outpaced buyers by more than 70 percent.
Outside of the pandemic, spring and summer of this year were the best periods for buyers in the past 12 years, Redfin added. Sales data were derived from active listings and closings on the Multiple Listing Service (MLS).
Asad Khan, senior economist at Redfin, said that in addition to having multiple options from which to choose, condo buyers are well-positioned to negotiate prices and ask for concessions—the nucleus of a “buyers’ market.”
“With condo buyers in the driver’s seat and rents poised to rise as multifamily construction declines, it may be a good time to make the switch from renting an apartment to owning a condo,” Khan said.
“Even though condo prices are still fairly high, and HOA fees are rising, condos are still more affordable than single-family homes. With some would-be condo sellers pulling back, buyers may not have this much negotiating power for long.”
Sales have lagged for multiple reasons, Redfin notes.
Prices for condos, much like single-family homes, are near record highs, and mortgage rates remain elevated. According to the Federal Reserve Bank of St. Louis (FRED), average mortgage rates for the week ending Oct. 2 were 6.34 percent.
Mortgages on condos also vary from traditional home loans. With condos, lenders take into account the purchaser’s financial position as well as the financial health of the condo property. That dual consideration often pushes mortgage rates even higher on condo loans. Buyers may also have to pony up a higher down payment, the Federal Housing Administration notes.
Buyers also have more purchasing power when it comes to condos versus single-family homes. Condos traded hands at an average price of $350,000 in August, Redfin reported, a 1 percent decline from year-earlier prices.
Single-family homes, meanwhile, averaged $428,500 in July, the FRED noted. Median home prices are highest in the western region at $646,100 for the second quarter, the National Association of Realtors reported.
Potential home buyers may be hesitant to purchase condos due to stiffer Homeowners Association regulations that have the potential for increased fees and special assessments, Redfin added.
California’s “balcony bill” requires regular inspection of balconies, stairways, and decks by a licensed structural engineer, and HOA fees recently spiked across Florida due to new regulations in the wake of the 2021 collapse of the 12-story Champlain Towers in Surfside that killed 98 people. State regulators called for additional inspections and insurance requirements for Florida’s more than 1.5 million condominium units.
Cecilia Cordova, a Redfin agent in Miami, said the state’s condo sellers are in a difficult situation.
“Condo listings have been piling up since the Surfside building tragedy,” Cordova said.
“That scared prospective buyers away from condos both because of legitimate safety fears and because it changed condo laws, which upped HOA and insurance fees.”
Although sellers outnumbered buyers in 43 of 50 metropolitan regions, the disparity was largest in Florida and Texas, Redfin said. In San Antonio, there were nearly four times the number of sellers versus buyers in August, while Miami and Tampa had 251 percent and 241 percent more, respectively.
