Surge in Condo Inventory Drives Price Drop in Florida and Texas
Condo prices are falling in major Florida and Texas metros as inventory surges and buyer interest wanes. According to a new report from Redfin, this trend is attributed to rising HOA fees and insurance costs, which are making condos increasingly difficult to sell.
In Tampa, the number of condos for sale increased by 57.2% from a year earlier in July. Meanwhile, pending sales decreased by 18.9%, and the median sale price fell by 4.9%. Houston experienced similar trends, with condo inventory up by 35.9%, pending sales down by 35.3%, and prices dropping by 6.5%. Although single-family homes in these regions also face a supply surplus, their market is performing better, with prices generally on the rise.
Nationwide Trends Show a Mixed Picture
Nationwide, the condo market presents a mixed picture. While inventory is increasing and pending sales are declining, prices continue to rise, albeit at a slower pace than before. The nationwide trend contrasts with the more pronounced drops observed in Florida and Texas.
Factors Behind the Decline in Demand and Surge in Condo Inventory
Several factors are driving the drop in condo demand and the rise in inventory in Florida and Texas:
1. Rising HOA Fees: HOA dues have surged more than 15% from last summer in major Florida cities like Tampa, Orlando, and Fort Lauderdale. They have also increased more than the national average in West Palm Beach and Jacksonville. The Surfside condo collapse has led to heightened maintenance requirements, further escalating HOA fees.
2. Soaring Insurance Premiums: Frequent natural disasters in Florida and Texas are contributing to skyrocketing insurance premiums. This situation is exacerbated by the challenges of finding adequate homeowner coverage, with some insurers exiting these states. The high costs are deterring condo buyers and prompting current owners to sell.
3. Investor Retreat: Real estate investors are showing decreased interest in condos. Nationwide, investor purchases of condos fell by 3% year over year in the second quarter. In Florida, agents report that investors who previously bought condos for rental income are now trying to sell.
4. New Construction Boom: Both Texas and Florida are experiencing a boom in new home construction, including multifamily buildings and new condo developments. This increase in supply is adding to the existing inventory, which is growing faster than demand.
Market Conditions in Major Metros
“The condo market isn’t moving,” said Steven Weiss, a Redfin Premier agent in Tampa. “Most buyers today prefer move-in-ready single-family homes. Selling a condo has become much more challenging, especially with rising HOA fees and the perception of diminishing value.”
National Condo Market Overview
On a national level, condo sales are sluggish but prices are holding steady. Pending condo sales fell by 5.5% year over year in July, marking the lowest level for that month on record. In contrast, single-family home sales remained relatively stable compared to last year.
The nationwide inventory of condos increased by 27.1% from a year ago, though this rise is less severe than in Florida and Texas. Despite the oversupply, the median condo sale price has increased by 3.9% year over year.
Broader Impact of Rising HOA Fees on Condo Inventory
Redfin agents in other regions are also noting slow condo markets, partly due to rising HOA fees. In San Jose, CA, condo inventory is up by 50.7% year over year, with prices down by 3.2%. Denver is seeing a 25.4% decrease in pending condo sales, with prices remaining flat.
Looking Ahead
As condo inventory continues to rise and demand remains weak, the market faces significant challenges. The evolving dynamics in Florida and Texas could offer insights into broader trends, influencing both local and national real estate markets.
