Prices for condos are falling. But is it just a blip, or something more like what the condo market experienced from 2006 to 2011?
On the chart below, you can see the concerning drop in the median sale prices for condos in regions around the country.
Hardest hit have been the South and the West, the same regions that felt the brunt of the real estate collapse back in 2006-2011.
Veronica Dagher reports in The Wall Street Journal on the causes of falling interest in condos, writing:
This dynamic is playing out in today’s market. While single-family home prices are high, they are rising more slowly now. The average condo price, meanwhile, fell 1.4%, marking the softest condo market since 2012, according to Intercontinental Exchange.
Condos are more likely to be found in sought-after neighborhoods and locations in major metropolitan areas and tend to sell at higher prices per square foot than single-family homes within that metro, said Jake Krimmel, senior economist at Realtor.com, which is operated by News Corp, parent of The Wall Street Journal.
Condos typically list at a 45% premium compared with single-family homes on a price-per-square-foot basis. This premium jumped to about 60% in 2021 when the condo market was super hot but sat at around 30% in June, said Krimmel.
High list prices for smaller spaces might not seem as desirable when mortgage rates are around 7%. Condos are also more likely to be near shorelines, so the rising cost of home insurance might be finally deterring potential buyers as natural disasters increase, he said.
The months of supply for condos, which indicates how long it would take to sell the existing inventory at the present sales rate, is near a 10-year high, said Asad Khan, senior economist at Redfin. Besides a momentary peak at the start of the Covid-19 pandemic, it hasn’t been so high since the early 2010s.
Action Line: Your Survival Guy is not in the predictions business. Only time will tell whether or not this is the beginning of a collapse in condo prices, or just a momentary blip. If you’re planning on buying a condo for retirement, give it a real hard look. When you want to talk about retirement and your plan, email me at ejsmith@yoursurvivalguy.com. And click here to subscribe to my free monthly Survive & Thrive letter.
