Condos Bruised in Texas and Florida

HOUSTON  — (By Dale King, Realty News Report) — Habitual stormy weather, surging homeowner and insurance fees and a thriving multifamily home construction business completing lots of new residences are among influences dampening the condominium market in Texas and Florida, says a new report from real estate brokerage Redfin.

Condo prices are falling in most major Florida and Texas metros. In addition, inventory of condominium units is piling up and buyers are backing away. The Seattle-based brokerage firm’s analysis also cites high homeowner association (HOA) fees and mounting insurance costs in Florida and the frequency of risky storms in both states for making condos a tough sell.

In Houston alone, condo inventory is up 35.9 percent, pending sales are down 35.3 percent, completed unit sales are down 26.3 percent and prices are down 6.5 percent.

However, a new residential tower in Houston’s Tanglewood area reports strong listing prices. In the Tanglewood area, Pelican Builders recently completed a 17-story condo tower called The Hawthorne at 5656 San Felipe. Hawthorne units currently listed for sale range from $1,495,000 ($986 per SF) to $4,345,000 ($1,262 per SF), according to the Houston Association of Realtors. (CRE veteran John Fenoglio of CBRE arranged $111 million in financing for the Hawthorne tower.)

Elsewhere in Texas

Redfin’s report  says the median sale price of condominiums has dropped in four of the five largest metros in the Lone Star State: Austin, down 1.9 percent; Dallas, down 0.8 percent and San Antonio, down 2.2 percent. Only Fort Worth showed an increase of 8 percent in the median sale price bracket.

Also, pending sales were down in four of the five major Texas metros, with only Dallas keeping its head above water with 5.7 percent growth. However, for completed sales, all five metros in Texas lost ground, with Fort Worth and San Antonio leading the downward spiral with -33.3 percent and -48.5 percent, respectively.

Florida’s condo market is in tough shape as well. In Tampa, Redfin says, the number of condos for sale soared 57.2 percent from July 2023 to July 2024. Pending sales dropped 18.9 percent and the median sale price fell 4.9 percent.

There’s also more supply than demand for single-family homes in both Florida and Texas, says Redfin’s outlook, but the market for them is faring a bit better than the condo sales arena. And home prices are generally increasing.

Nationwide, condo inventory is increasing and pending sales are falling—though not as much as in Florida and Texas—and prices are still rising.

“The condo market isn’t moving,” said Steven Weiss, a Redfin Premier agent in Tampa. “Most of today’s buyers want move-in ready single-family homes. It’s much more difficult to sell a condo”

“Buyers are aware,” he said, “that we’re at somewhat of a tipping point for condos, and that their value may continue to decline as HOA fees rise and people grow more wary of buying in a waterfront building.”

Several factors are driving down demand for condos in the Sunshine and Lone Star state, says the report:

  • Surging HOA fees in Florida.  Redfin found that HOA dues are up more than 15 percentfrom last summer in Tampa, Orlando and Fort Lauderdale. They’ve also risen more than the nationwide average in West Palm Beach and Jacksonville. HOA fees are increasing because of the Surfside condo collapse which led to additional maintenance requirements for condos and because of rising insurance costs.
  • Climate calamities.Frequent and intense natural disasters in Florida and Texas are a major factor in skyrocketing insurance costs, which contributes to surging HOA fees in condo buildings as maintenance costs are passed on to unit owners. Some buyers in Florida and Texas struggle to find homeowner coverage at all as insurance companies leave the states. Riding costs along with the natural disasters themselves are scaring off condo buyers and motivating owners to sell.
  • Waterfront locales: Condo owners are hit particularly hard because many of those buildings sit on the waterfront where insurance costs are higher.
  • Investors have backed off. Real estate investors are less interested in condos than they used to be. Nationwide, investor purchases of condos fell 3 percent year-over-year in the second quarter. Florida Redfin agents report investors aren’t buying condos anymore. Instead, those who bought condos a few years ago to rent them out are trying to offload them.
  • New construction boom.Texas and Florida are building more new homes, including multifamily buildings, than anywhere else in the country. That includes many new condo buildings – and this adds to the surge in condo inventory.

Viewing the U.S. as a whole, pending condo sales fell 5.5 percent year-over-year in July, dropping to the lowest level of any July on record. By comparison, pending sales of single-family homes were essentially unchanged from a year ago.

The downturn in the national condo market is being driven by the aforementioned declines in the major Florida and Texas metros and decreases in other Sun Belt metros like Phoenix and Nashville. Redfin agents in other parts of the country also report slow condo transactions, too, partly due to rising HOA fees.


Sept. 23, 2024  Realty News Report Copyright 2024

Photo credit: CALpix Copyright 2024

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File: Condos Bruised in Texas and Florida Pelican Builders Tanglewood Condos Bruised in Texas and Florida Redfin

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