The market is ultra hot, but it’s NOT the same speed everywhere. It’s tempting to impose the idea of a blazing market on every single neighborhood and property type, but that’s a quick way to get into value trouble. Let me share exactly what I mean by looking at the condo market. If you are not local, are you seeing something similar in your area?
BIG POINT: The condo market is NOT showing skyrocketing prices like the rest of the single family market this year.
1) Slower price growth The median price for single family detached homes in 2021 is up a whopping 18.3% so far in the Sacramento region. In contrast, condos are only up 9.7% so far. Yes, I just said they’re only up 9.7%. I know how that sounds, but that’s about half the growth we’ve seen in the rest of the market. In short, condos have definitely been increasing, but the speed is WAY slower.
2) Condos are still moving quickly though: Even though condo prices aren’t rising as quickly, they are still selling about as fast as single family detached homes. This reminds us the market moving quickly doesn’t always mean we’re seeing rapid price growth.
3) The pandemic x-factor: Everyone wants that perfect backyard paradise to quarantine in style (especially with a pool). This sounds like a rosy made-up narrative, but the stats actually back it up. If you didn’t know, condo sales volume dropped 10% from 2019 to 2020 in the Sacramento region, so clearly buyers turned their gaze away from condos.
4) BUT condos represent affordability today: So far in 2021 condo volume has been up slightly for the first two months compared to last year. Remember, condos represent one of the most affordable products in the market, so with skyrocketing prices in the single family detached world, a condo may represent a more viable option for some buyers today. Keep in mind there aren’t many condo sales each month, so we need a few more months to see if this is a solid trend or just a fluke for the first two months. In other words, don’t write home over this, but let’s stay tuned because this could be interesting.
APPLICATION STEP: When valuing properties in today’s lopsided market, be sure to look at actual comps and pendings in the neighborhood rather than imposing a hot headline on the market.
By the way, here’s a YouTube Live conversation I had with Matt the Mortgage Guy yesterday. Enjoy if you wish (it’s an hour).
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Questions: What stands out to you about the points above? What are you seeing out there right now? I’d love to hear your take.
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Great information Ryan. Condos are also trailing the rest of the market up north.
Thanks Gary. One of these days I can’t wait to make it up to your area to catch up. We’ll have to compare markets too. Been too long since I’ve seen the PNW.
I currently have a few buyers looking at condos and I recently pulled all the sold condos since 1/2/2021 to review the closed sale trends and I 100% agree with your post. The sellers are still getting offers above sales price but, the appraisal tells the real truth. Condos are definitely a longer term investment and not like single family homes and zip code does matter.
Thank you Estella. I really appreciate hearing your boots on the ground perspective and confirmation of trends. I’m grateful for that.
The condo market is definitely hot in my market area, however not at the same level as single-family homes. The downtown Birmingham area has undergone revitalization over the last several years so it’s natural that sales in this area are on the increase. This is helped by the development of lofts and the conversion of older buildings into condo units. I’ll have to run some numbers and take a look at how the two compare.
Thanks Tom. It’s fascinating how markets are always changing. We’ve also seen an advent of hip new condo developments in our Downtown / Midtown market. In fact, we even had a $4.1 million dollar sale as a penthouse unit in one of them (that’s getting up there for our market).
Hi Ryan,
Is the Sacramento region, 3 counties or 6?
It depends who you ask. I reject the tri-county idea because what about Yolo? My visuals should always clarify what I mean by “region” as the graphs typically include Sacramento, Placer, Yolo, and El Dorado (thus my definition of “region” includes four counties). This should always be clear on the visual itself just so you know. Of course some want Yuba and Sutter included in the region, but I choose not to include that in my data as I don’t cover those areas for work and they really are a bit more geographically distant from Sacramento proper too.