According to a new Redfin research, about two-thirds (68.4%) of condominiums sold in the United States in February sold for less than their initial asking price. This is the highest February figure in five years and up from 63.3% a year earlier.
Although it is less than the increase for condominiums, the percentage of townhouses selling for less than their initial asking price also reached its highest February level in five years, going from 54.7% to 59.4%. The percentage of single-family homes that sold for less than list price increased to 64.2% from 61.2% a year earlier, which was less than the increase for condos, marking the highest February level in two years.
The percentage of homes that sell for less than their initial list price has been reverting to pre-pandemic levels across all property types. Condos, however, are the closest to meeting that criterion; the percentage of condos that sold for less than list price in February was just 3.5 percentage points lower than February 2019 levels, compared to 4.1 and 4.9 percentage points lower for single-family homes and townhouses, respectively.
As inventory has increased and demand has been stifled by rising prices and mortgage rates, the housing market has been cooling. As a result, buyers now have more negotiating power and may frequently negotiate a cheaper price. According to Redfin agents, the condo market has been slowing down particularly swiftly, especially in Florida, as HOA dues skyrocket due to new safety standards and increased insurance prices.
Buyers Remain Uncertain, But Gaining Bargaining Power
Condo sellers are witnessing a wider disparity between their sale and list prices than previously, in addition to the fact that condos are increasingly selling for less than their list price. With a sale-to-original-list-price ratio of 95.4%, the average condo sold in February for 4.6% less than the owner had asked for it. This is a decrease from a ratio of over 100% three years ago and 96.4% one year ago.
Condos were originally thought to be the most cheap option to become a homeowner, but many individuals have been priced out of the market.
“The Florida condo market is in uncharted territory,” said Tim Harper, a Redfin Premier real estate agent in the Orlando metro area, where 84.8% of condos that sold in February went for less than their original asking price. “We’re seeing a massive influx of condo inventory because a lot of senior citizens on fixed incomes can no longer afford their monthly payments, and a lot of other condo owners just want to move because they’re tired of dealing with rising HOA fees and special assessments.”
The average condo that sold in Orlando had a sale-to-original-list-price ratio of 90.8%, up from 94.1% a year earlier, while condo listings increased 30.7% year-over-year in February, which was double the 15.3% gain countrywide. This indicates that the sale price was over 10% lower than the initial asking price.
The condo market is also cooling in other places. Among the metros Redfin examined, Denver saw the largest increase, with 77.2% of condominiums selling for less than their initial list price in February, up 17.2 percentage points from the previous year. Charlotte, NC (+15.3 ppts), and Virginia Beach, VA (+16.2 ppts) came next.
“Oh condos. Poor condos,” said Sacramento, CA Redfin Premier agent Alison Williams. “HOA dues are just going up and up and up, primarily because insurance costs for homeowners associations are going up. When you buy a $400,000 condo, it often means paying a $500 monthly HOA fee, so for many people, it’s not really that affordable anymore. Some buyers are looking to small single-family homes instead because there’s no HOA.”
However, Redfin Senior Economist Asad Khan stated that there is some optimism in the condo market.
“The good news if you’re a prospective condo buyer is that sale prices are now falling in some areas, and sellers are offering up concessions, meaning you might be able to get a good deal,” Khan said. “If you’ve been priced out of owning a condo, know that rents are hovering below their pandemic highs thanks to an apartment building boom, so renters may also find success asking for concessions.”
Top 10 metros w/ the highest share of homes sold below original list price:
| U.S. metro area | Share of homes sold below original list price | Y/Y change in share of homes sold below original list price | Median original list price | Y/Y change in median original list price | Average sale-to-original-list-price ratio |
|---|---|---|---|---|---|
| Hartford, CT | 35.2% | 7.9 ppts | $249,900 | 11.1% | 100.0% |
| New Haven, CT | 39.8% | 0.8 ppts | $247,000 | 3.8% | 99.4% |
| Providence, RI | 41.5% | 4.6 ppts | $384,950 | 27.3% | 98.5% |
| San Jose, CA | 42.2% | 3.4 ppts | $799,000 | 6.7% | 100.4% |
| Bridgeport, CT | 43.2% | 4.5 ppts | $369,500 | 5.7% | 99.8% |
| Virginia Beach, VA | 48.4% | 16.2 ppts | $325,000 | 8.4% | 98.2% |
| Frederick, MD | 49.4% | 2.9 ppts | $285,000 | -1.7% | 98.2% |
| San Francisco, CA | 51.9% | 9.4 ppts | $995,000 | -4.5% | 100.0% |
| Oakland, CA | 52.2% | 13.5 ppts | $549,000 | -7.7% | 98.6% |
| San Diego, CA | 52.3% | 10.5 ppts | $619,000 | 0.7% | 98.2% |
To read the full report, click here.
