Condos are struggling, and they’re really having a moment in today’s housing market. Let’s talk about what’s going on with volume, supply, and prices. Be sure to read my closing thoughts about housing doom and hot pockets too.
UPCOMING SPEAKING GIGS:
12/5/24 Made 4 More Team (Exporting Data from MLS)
12/11/24 Gateway: Think Like an Appraiser (private)
12/18/24 Coldwell Banker Sierra Oaks
1/15/25 Mike & Joel Event (details TBA)
1/16/25 Sac Real Producers event (details TBA)
1/24/25 PCAR Market Update (details TBA)
2/6/25 She Invests event (TBA)
2/11/25 MLS Meeting TBA
2/18/25 Travis Credit Union TBA
3/6/25 Yolo Association YPN Event
3/12/25 Windemere Sierra Oaks
4/8/25 Culbertson and Gray (private I think)
11/4/25 SAR Main Meeting
1) CONDO VOLUME IS THE LOWEST EVER
Condo volume this year has been the lowest on record over the past few decades in Sacramento County. Detached sales are stronger compared to last year, but that’s not the vibe at all with condos. What’s going on? Well, condos have had issues with rising association insurance costs, increasing HOA fees, trouble obtaining financing from lenders, and maybe even some issues with California’s new balcony law. Look, not every condo subdivision is experiencing all of these issues, but there is no mistaking many condos have legitimate headwinds.
2) CONDO HOUSING SUPPLY HAS SPIKED
Condo supply has seen a sharper spike than the rest of the market, and that’s making a difference with housing temperature in some condo neighborhoods.
And here’s a much wider view from Trendgraphix. Do you see the difference between condos and detached units?
3) PRICES ARE STARTING TO DROP
I’ve been noticing downward price pressure in some condo neighborhoods. This doesn’t mean every location is declining, but it’s been pretty clear in some recent appraisals. Check out the visuals below. What do you see? Keep in mind the decline has not been like a 2007 free fall. My advice? If you’re selling, don’t get stuck on the highest prices from 2022 and 2023. Consider properties that are actually getting into contract. Remember, sales are like historic artifacts since they tell us what the market used to be like when these units got into contract. In contrast, actives and pendings tell us what the market is like right now.
CLOSING THOUGHTS: HOT POCKETS & DOOM
I like to say the housing market is like a hot pocket taken out of the microwave too early. The temperature might not be the same everywhere. Some spots are blazing hot, others are lukewarm, and some are frozen. Well, the condo market has been frigid lately, and it’s something we need to keep watching. With that said, I think the temptation for some is to say condos are the leading indicator of doom for the entire market. I get it, but don’t ignore unique issues going on with condos that are not happening with the detached market (trouble obtaining financing and rising insurance costs for the association). I’m not sugarcoating here. I’m just saying we want to be careful about imposing condo vibes on everything else unless that’s what the stats are showing. For reference, condos have been about 6% of all sales this year in Sacramento County.
I hope this was interesting or helpful.
Questions: What have you been seeing happen with condos? What’s happening with prices? Any insight or stories to share? Did I miss anything?
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Hey Ryan,
Are you using the Metrolist definition of “condo” or the legal description? For those not in our area, Metrolist lumps together condominiums with townhouses without consideration of property rights. I doubt it makes a difference to the points you’re making.
I wish I could use a technical definition, but I have to go with properties listed as condos in MLS. I realize properties are sometimes not listed correctly, but that’s always been the case. Doubtful there is a difference here though as you said, and I’m finding my stats line up with the stories I’m hearing from the trenches. Thanks Joe.
MetroList does have a townhouse property subtype. We just used it on a listing in Campus Commons. Ryan, does that mean the stats above don’t include those labeled as townhouse? BTW, we just got it into contract after a month (and a price reduction). Traffic at open houses was decent, but almost no one visited with an appointment.
Great question. A townhouse is an architectural style, but a condo is a form of ownership. So, a condo could technically be described as a townhouse in design (if that’s what the design is), but it’s possible that a townhouse could be a single family attached property that is NOT a condo. So, it’s proper in my mind to only include “condo” when trying to assess the condo trend in MLS. Granted, I suspect some condos were described as “townhouse” instead, and that’s an entry mistake or maybe an area where MLS needs to improve. In short, I may need to figure out a way to parse the two. On a practical level, when I pull comps in a condo complex, I remove all parameters so I can capture all sales (just in case something was entered improperly). In my mind, “townhouse” should be selected only if it’s not a condo.
Congrats on getting into contract also. That’s great news!!!
But I am curious now. I’ll run stats for just “townhouse” as a category. Part of me wonders if the “townhouse” category is what used to be “PUD” if I’m not mistaken. I’ll know more at some point, and I’ll run some visuals to see if there is any different trend.
Okay Steve, I checked, and the “townhouse” field is junk. There have been only 1900 properties categorized this way since 1998 (and 230 this year). I need to talk to MLS about what went on here before using this in any way because the trend has seen exponential growth since 2021 (barely mentioned before), and I’m guessing that has to do with the way this field has been changed in recent years. Like I said, I think this might have been PUD previously, but I could be wrong. Glad to share an image if you wish to see, but the number of sales is minimal with only 200+ in 2021 and beyond. However, if some of these are legit condos, it can change the trend for volume a bit. But even if we added all the “townhouse” listings to the “condos,” we would still have lower volume in 2024 compared with 2023, and that is consistent with the trend I’m reporting. In other words, condos have taken a bigger hit than detached units.
I think “townhouse” was imported from one of the NorCal MLS Alliance members into Metrolist. I’m not sure local agents have settled on specific uses for these types of properties. I’ll ask at the MLS Committee meeting in January for details.
Thanks Joe. I just wrote a detailed comment back to Steve about this. Let me know if you find anything. I wonder what happened to the PUD sales. I”m pretty sure that was a separate category previously. Or maybe it was “condo/PUD” as on category. No matter what, this is not a field we can really on since it’s too patchy in its use.
It’s condo/pud. Both mixed together. I reviewed an appraisal years ago where the appraiser relied on the Metrolist classification and was wrong. Fun times
Yeah, it’s not always easy to tell if it’s a condo or not.
Hey Ryan and Joe, my understanding is that townhouse is more than just an MLS description – it means the unit owner owns the land underneath it, where condo owners own an undivided interest in the entire complex property. Is that correct? And yes, I also think it’s related to the PUD type of complex. I don’t know if all townhouses are in PUDs, but it seems like they’re synonymous.
I can understand the distinction, but I’m guessing it is not properly used. It never has been perfect in MLS when it comes to condos vs attached homes where the land is owned. Whatever the “townhouse” represents, it’s not used often, so it’s not a field I can really trust right now. I’m going to think about what to do with these sales though.
Thank you for calling out this layer of the market and taking a look at it. There might be some good condo buy opportunities coming in Sacramento if the trend continues.