Buyers looking to take advantage of historically low interest rates might want to consider going the condo or co-op route, as single-family homes continue to explode in prices, especially in ultra-competitive housing markets, economists and real estate experts told Inman.
A Redfin study released Thursday showed that home price appreciation due to low inventory is outpacing affordability gains associated with low rates. Daryl Fairweather, Redfin’s chief economist said buyers can find a better deal looking at condominiums instead of single-family homes in competitive markets.
“Those competing forces make the current market a wash for many buyers looking for single-family homes in competitive areas,” Fairweather said. “Buyers searching for condos can find a better deal, both on overall price and mortgage payments, because most condos are less competitive than single-family homes as people move out of densely populated urban areas.”
Data from the National Association of Realtors (NAR) reflects slower annual price appreciation for the condo and co-op sector in metropolitan markets. The nation’s median existing sales price for a condo or co-op in the second quarter of 2020 was $260,500, an increase of 2.2 percent.
Over the same period, in the same metro markets, the median existing single-family home was reported at 291,300, which was an increase of 4.2 percent year over year.
“Looking at NAR’s sales data for single-family homes vs. condos, prices are rising across the board, though not quite as swiftly for condos,” Danielle Hale, the chief economist at realtor.com, told Inman. “That’s consistent with realtor.com data showing that homebuyer traffic is up for urban areas AND suburban area — it’s just growing more in suburban areas than urban areas. ”
Hale said idea that people are going to get a steal anywhere in the market is simply not consistent with what she’s seeing, but there may be some super-urban markets like Manhattan that are bucking that trend.
“The market for condos may be less competitive than single-family homes, but real estate is pretty competitive for most buyers right now,” Hale said. “I think that’s one of several important aspects for condo buyers to consider.”
Karen Kostiw, a real estate agent with Warburg Realty in New York City, is seeing the interest in co-ops first hand as she helps prospective homeowner that aren’t buying into the suburban boom.
“I have a lot of first time home buyers that are purchasing coops due to the current attractive pricing, low interest rates and their desire to live in the city rather than the suburbs as they are single and still love the city lifestyle,” Kostiw said.
It’s important, however, to keep a watchful eye on maintenance fees, which can even outpace the high property taxes usually associated with the suburbs. Buyers should also look at the historical increase for the building to make sure that costs won’t get too high.
“There is the understanding that there are opportunities that taxes, utilities or other expenses may drive the monthlies higher,” Kostiw said.