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).
Thanks for being here.
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.