If you’ve been considering buying a condo as a more affordable alternative to a single-family home, you might be surprised to learn that the condo market is facing significant challenges. While condos have often been viewed as an entry point into homeownership, recent trends show that condo sales are slumping more than those of single-family homes.
In July 2024, condo sales were down 12% compared to a year ago, while sales of single-family homes dropped by just 1%, according to the National Association of Realtors® (NAR). This shift isn’t limited to any one region; it’s happening across the country. Let’s take a closer look at what’s behind this downturn in the condo market and what it means for buyers and sellers.
Why Are Condo Sales Slowing?
There are several key reasons behind the decline in condo sales:
1. Rising Costs of Ownership
Owning a condo often comes with additional costs like homeowners association (HOA) fees, which cover the maintenance of shared spaces, building insurance, and other services. These fees have been rising steadily. Currently, the average HOA fee for condos listed on Realtor.com is $650 per month. In addition to monthly fees, condo owners are sometimes hit with large assessments for building repairs and upgrades, especially as buildings age.
Many condo buildings constructed in the late 1970s and early 1980s are now over 40 years old and in need of significant maintenance. The tragic collapse of the Champlain Towers South in Florida in 2021 highlighted the importance of keeping up with these repairs. As a result, buyers are more wary of potential assessment costs and the rising insurance premiums that accompany older condo buildings.
2. Higher Per-Square-Foot Costs
While condos may seem like a cheaper option based on the overall list price, the price per square foot can actually be much higher than that of single-family homes. In July 2024, the median list price for condos was $296 per square foot, compared to $218 per square foot for single-family homes. This premium is especially pronounced in urban areas where condos are often located.
Buyers looking for “more bang for their buck” are increasingly opting for single-family homes, even if they have to stretch their budget. The higher price per square foot of condos makes them less appealing, especially in a market where home prices and mortgage rates remain high.
3. Slower Appreciation Rates
From an investment standpoint, single-family homes tend to appreciate faster than condos. While both types of homes saw significant price increases during the pandemic, condo prices have started to decline. Condo list prices in July were down 5.4% compared to a year ago, while single-family home prices edged up slightly by 0.2%. As a result, condos are becoming less attractive to buyers seeking a return on their investment.
Real estate experts note that buyers are increasingly getting “stuck” in their condos, unable to sell them as quickly or for as much profit as they could a single-family home. This slower appreciation, combined with the rising costs of ownership, is making the condo market less appealing to potential buyers.
4. More Inventory, Less Demand
As demand for condos wanes, the supply is increasing. In July 2024, condos made up 21.2% of active real estate listings, up from 19.5% a year earlier. This surplus of inventory is another sign that the condo market is cooling off.
With more options available, condos are sitting on the market longer. The average time on the market for a condo in July was 58 days—eight days longer than single-family homes. This extended time on the market can create headaches for sellers and drive down prices even further.
Regional Variations in the Condo Market
The condo market slowdown isn’t just a Florida issue, although Florida’s market has been affected by rising insurance costs and new laws increasing assessment fees. Across the country, condo sales are down significantly:
- The Midwest saw a 17% decline in condo sales over the past year.
- The South experienced a 15% drop.
- The West had an 11% decline.
- Only the Northeast remained relatively stable, with flat sales numbers.
While some areas in Florida, like Fort Myers, saw condo sales rise, other markets, like Daytona Beach, have seen sales fall sharply. This inconsistency makes it difficult to predict how the condo market will evolve in specific regions.
What This Means for Buyers and Sellers
If you’re considering buying a condo, now might be the time to negotiate a better deal. With more inventory on the market and prices beginning to drop, buyers could find themselves in a stronger position to ask for concessions from sellers.
However, it’s essential to factor in the additional costs of condo ownership. Higher HOA fees, potential assessments for maintenance, and rising insurance premiums can make a condo more expensive over time than a similarly priced single-family home. Be sure to carefully review the condo association’s financial health and any upcoming assessments before making a purchase.
For sellers, the cooling market may mean a longer wait to find a buyer and potentially lower offers. Pricing competitively and being transparent about fees and assessments will be crucial to attracting interest in a slower market.
Navigating the Changing Condo Market
The condo market is currently in a slump, with sales down and costs rising. For buyers, this could present an opportunity to purchase a condo at a lower price, but it’s important to weigh the long-term financial implications, including HOA fees and future assessments. For sellers, the market may be more challenging, with condos spending more time on the market and fetching lower prices than single-family homes.
Whether you’re buying or selling, understanding the current trends and adjusting your strategy accordingly can help you navigate the shifting landscape of the condo market.
If you’re unsure about your next steps in this unpredictable market, working with an experienced real estate agent can provide valuable insights and guidance tailored to your specific needs.
If you’re considering a move or investment and require a trusted Real Estate Broker, we’re here to assist you. Contact us via email at TEAM@McDanielCallahan.com, complete the form below, or give us a call at 925-838-4300. We are ready to provide expert guidance and support for all your real estate needs. Terry McDaniel DRE License #00941526
https://www.realtor.com/news/trends/condo-market-sales-slowdown/
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