First-time Homebuyers May Find Success in Slow Condo Price GrowthReturn to Blog
The hot housing market is not even — and some cities and types of properties are noticing higher price gains than others. Condominium prices, in particular, are rising less than those for single-family homes across the board, according to recent insights from Black Knight.
The data firm reports that single-family home prices grew by 12.3% on average in 2020 — the highest appreciation rate since 1992 — but condos aren’t gaining as quickly. That could be an opportunity, especially for first-time homebuyers, in a market starved for inventory and where bidding wars occur in many markets.
Here’s what we’re going to cover today:
- What’s happening with condo pricing?
- Why should you care?
- How first-time homebuyers can benefit from this trend.
- What to do moving forward?
What’s happening with condo pricing?
From analyzing the data provided by Black Knight, we’re all able to tell that Condo pricing was soft in 2020. Now, we’re in the middle of a scorchingly hot housing market that is predominantly led by single-family home sales. Although single-family prices rose by 12.3 percent last year, on average, condo prices only increased by about 6.4 percent.
For example, Advent Properties’ own Darryl Glass has experienced extended time on the market for his condo listings. 1501 9th Avenue lasted over 80 days on the market before pending sale; even listings that offer an incredible value for the location like 407 Orange Street are experiencing extended time on the market. That comes as a surprise while single-family home listings like 27084 Underwood Avenue get sold in less than half of the time condo listings spend on the market.
Black Knight experts suspect that this trend implies people are leaving the densest parts of cities for areas where they can buy properties with more space. Single-family homes, in particular, were popular in 2020 as people sought extra rooms and sacrificed their commutes. One possibility is that some home sellers may have seen a dislocation or a change in lifestyle because of the COVID pandemic.
Why should you care?
Experts believe that condo prices are often on the extreme ends of the market. They’re higher when the housing market is high and lower when the market is low, so it’s rare for condo prices to diverge from the rest of the market the way they’re going now.
There is a little bit less pressure on the side of inventory for condos, opposed to single-family homes, which have regressed over the last couple of months. The housing shortage is not a new issue, but a hot market has intensified its impact this year, and there’s little hope the trend will reverse in the near term. However, condos are generally more available than single-family homes given current real estate trends, so that’s a part of the pricing disparity.
In some competitive housing markets, condo prices are trending even lower than the national average. According to Black Knight’s data, single-family home prices in San Francisco were up 11% year-over-year, but condo prices were down. Meanwhile, in nearby San Jose, single-family home prices were again up by around 11%, but condo prices only rose about 2% year-over-year.
How first-time homebuyers can benefit from this trend!
First-time homebuyers always stand to benefit when any segment of the housing market shows relative affordability. First-timers are also usually more likely to be interested in condos anyway. But are first-time buyers still following that trend during the pandemic?
Idealistic mortgage rates and relatively soft prices may suggest buyers are not interested in urban areas as they have been in the past. That may potentially be an opportunity for some first-time homebuyers! With high housing competition this spring, first-time buyers are likely to need any advantages they can get to close the deal, and showing interest in stagnant condo markets might provide them with the inventory they desire.
What to do moving forward?
Condo prices aren’t rising as quickly as single-family home prices in the current real estate market, and changing property preferences among buyers and could present opportunities for prospective first-timers who are still comfortable living in dense urban areas.
It may be too early to say if the condo pricing trend portends any other shifts in the real estate market, but one thing for sure — competition for housing will remain high at virtually every price point this spring. If you’re looking for a competitive edge to get your offer accepted, give Darryl Glass a call today at (510) 500-7531, or tap here to schedule a call at a time convenient for you!