According to a new study from Redfin, condo prices are falling in major Florida and Texas metros, as inventory piles up and buyers back off, as high HOA fees and insurance costs are making condos a tough sell in this current marketplace.
In Tampa, the number of condos for sale soared 57.2% from a year earlier in July 2024, pending sales dropped 18.9% and the median sale price fell 4.9%. In Houston, condo inventory is up 35.9%, pending sales are down 35.3% and prices are down 6.5%. There’s also more supply than demand for single-family homes in Florida and Texas, but the market for them is faring a bit better, and prices are generally increasing.
Nationwide, condo inventory is increasing and pending sales are falling—though not as much as in Florida and Texas—and prices are still rising.
Why Is Inventory Growing?
- Surging HOA fees in Florida: A separate Redfin analysis found that HOA dues are up more than 15% from last summer in the Tampa, Orlando, and Fort Lauderdale markets. They have also risen more than the nationwide average in West Palm Beach and Jacksonville. HOA fees are increasing because the Surfside condo collapse led to additional maintenance requirements for condos, and because of rising insurance costs. On June 24, 2021, Champlain Towers South, a 12-story beachfront condominium in the Miami suburb of Surfside, Florida partially collapsed, causing the deaths of 98 people. Four people were rescued from the rubble, but one died of injuries shortly after arriving at the hospital, while 11 others were injured. Approximately 35 were rescued the same day from the un-collapsed portion of the building, which was demolished days later.
- Climate disasters contributing to soaring insurance premiums: On a related note, frequent and intense natural disasters in Florida and Texas are a major factor in skyrocketing insurance costs, which contributes to surging HOA fees in condo buildings as maintenance costs are passed on to unit owners. Some buyers in Florida and Texas struggle to find homeowner coverage at all as insurance companies leave the states. Those rising costs, along with the natural disasters themselves, are scaring off condo buyers and motivating condo owners to sell. Rising insurance costs also impact single-family homes, but condo owners are hit particularly hard because many condo buildings are on the waterfront, where insurance costs are higher. Owners of single-family homes on the waterfront are more likely to have enough money to pay high insurance costs or pay cash to avoid insurance altogether. A separate Redfin report found that the cost of home insurance is denting wallets nationwide with 70.3% of Florida homeowners and 51% of California homeowners say they or the area they live in has been impacted by rising home insurance costs or changes in coverage (e.g., their insurer dropped them) over the past 12 months.
- Investors have backed off: Real estate investors are less interested in condos than they used to be; nationwide, investor purchases of condos fell 3% year-over-year in the second quarter. Florida Redfin agents are reporting investors aren’t buying condos anymore; instead, those who bought condos to rent them out a few years ago are trying to offload them.
- New construction boom: Texas and Florida are building more new homes, including multifamily buildings, than anywhere else in the country. That includes many new condo buildings, some of which were built in the wake of the Surfside condo collapse, which revealed that many older condo buildings on the Florida coast needed to be replaced. That’s adding to the surge in condo inventory, which is piling up as buyers turn away. LendingTree recently reported that across the nation’s 50 largest metros, 1.48 million housing units were built from 2020 through 2022, as just 1.95% of these metros’ 75.89 million housing units were built from 2020 through 2022.
“The condo market isn’t moving,” said Steven Weiss, a Redfin Premier Agent in Tampa. “Most of today’s buyers want move-in ready single-family homes. It’s much more difficult to sell a condo. Buyers are aware we’re at somewhat of a tipping point for condos, and that their value may continue to decline as HOA fees rise and people grow more wary of buying in a waterfront building.”
Condo Sales Slow but Maintain Value
Redfin fund that nationwide, pending sales of condos fell 5.5% year-over-year in July 2024, dropping to the lowest level of any July on record. For the sake of comparison, pending sales of single-family homes were essentially unchanged from a year ago.
The number of condos for sale rose 27.1% from a year ago, a major increase but substantially smaller than what Florida and Texas are seeing. The mismatch in supply and demand hasn’t yet pushed down prices nationwide; the median condo-sale price is up 3.9% year over year.
The downturn in the condo market nationwide is being driven by the downturns in the major Florida and Texas metros as previously discussed, as well as other Sun Belt metros like Phoenix and Nashville.
But Redfin agents in other parts of the country report slow condo markets, too, partly because of rising HOA fees. San Jose, California for instance, condo inventory is up 50.7% year-over-year, and prices are down 3.2%. In Denver, pending sales of condos are down 25.4% and prices are flat.
Click here to access Redfin’s latest report on trends in condo sales.
The post What’s Holding Back Condo Sales? first appeared on The MortgagePoint.
