Condo market continues to soften as insurance, HOA fees rise
Sellers outnumbered buyers by more than 2 to 1 in September, the biggest gap in 13 years. It’s also an opportunity for buyers who can manage the costs.
The number of buyers in search of a condominium is the lowest it's been in 13 years as rising fees are deterring first-time homebuyers in an already slow housing market.
A new report from Redfin estimates that there were 88,500 condo buyers and just over 197,000 sellers in the U.S. in September. That translates to 123% more sellers, the largest gap since 2013 and a big jump from a year ago, when the gap was 95.5%.
The report cited rising insurance premiums and homeowner association fees as major factors for the drop in demand, particularly in Texas and Florida where increased costs due to natural disasters are having an impact.
An 'opportunity' for buyers: The seller-buyer imbalance in the condo market means more room for price negotiation, which could help those first-time buyers balking at the higher fees, said Assad Khan, senior economist at Redfin.
"For renters who have saved for a down payment and are ready to build equity, these buyer-friendly conditions are an opportunity," Khan said. "Although condo prices and HOA fees remain relatively high, buyers have more room to negotiate price cuts, and condos are still generally more affordable than single-family homes."
Prices are dropping: The median sale price for a condo in September was $339,000, down 0.8% year-over-year, according to the report. Prices are expected to fall further, with the report noting that 37% of the condos sold that month had a price reduction. Five years ago, the share of condos with a price reduction was around 16%.
For sellers who aren't able to rent out their unit, the best strategy is to choose a list price lower than anyone else in the building, recommended Cecilia Cordova, a Redfin Premier agent in Miami. "It's not time for you to try to experiment with a higher price," she said.
Buyer-friendly markets: The state where buyers have the most negotiating power is Texas, according to the report. San Antonio has the widest seller-buyer gap among U.S. metro areas — a whopping 459% — while Houston and Austin were also near the top.
Miami also has one of the nation's widest gaps, with an estimated 274% more condo sellers than buyers in September.