C
ondo inventory is surging while pending sales are dropping in major Florida and Texas metros such as Miami, Jacksonville, Austin, and San Antonio. This is causing prices to decline due to high HOA fees, insurance costs, and destructive natural disasters. In Tampa, for instance, there was a 57.2% increase in condo inventory in July compared to a year earlier, a 18.9% drop in pending sales, and a 4.9% decrease in median sale price. Similarly, Houston saw a 35.9% increase in condo inventory, a 35.3% drop in pending sales, and a 6.5% decrease in median sale price. The supply of single-family homes in Florida and Texas is higher than demand, but their market is faring better than condos, with prices generally increasing.

    Nationwide, condo inventory is increasing while pending sales are falling, though not as much as in Florida and Texas. The median sale price is still rising.

    In Texas and Florida metros among the 50 most populous U.S. metros:

    - Austin, TX: $380,000, -1.9% (median sale price YoY), -12.9% (pending sales YoY), -11.1% (sales YoY), 4.2% (new listings YoY), 28.6% (active listings YoY)

    - Dallas, TX: $270,000, -0.8% (median sale price YoY), 5.7% (pending sales YoY), -0.9% (sales YoY), 7.9% (new listings YoY), 61.7% (active listings YoY)

    - Fort Worth, TX: $217,000, 8.0% (median sale price YoY), -3.9% (pending sales YoY), -33.3% (sales YoY), -1.7% (new listings YoY), 65.4% (active listings YoY)

    - Houston, TX: $159,000, -6.5% (median sale price YoY), -35.3% (pending sales YoY), -26.3% (sales YoY), -8.0% (new listings YoY), 35.9% (active listings YoY)

    - San Antonio, TX: $199,000, -2.2% (median sale price YoY), -15.4% (pending sales YoY), -48.5% (sales YoY), 1.2% (new listings YoY), 58.3% (active listings YoY)

    - Fort Lauderdale, FL: $230,000, -4.2% (median sale price YoY), -18.0% (pending sales YoY), -13.9% (sales YoY), 14.7% (new listings YoY), 63.4% (active listings YoY)

    - Jacksonville, FL: $270,000, -6.6% (median sale price YoY), -15.9% (pending sales YoY), -14.3% (sales YoY), 27.6% (new listings YoY), 80.7% (active listings YoY)

    - Miami, FL: $403,000, -2.9% (median sale price YoY), -12.9% (pending sales YoY), -7.9% (sales YoY), 13.0% (new listings YoY), 39.9% (active listings YoY)

    - Orlando, FL: $218,500, -0.7% (median sale price YoY), -22.6% (pending sales YoY), -17.3% (sales YoY), -6.6% (new listings YoY), 67.5% (active listings YoY)

    - Tampa, FL: $237,750, -4.9% (median sale price YoY), -18.9% (pending sales YoY), -8.1% (sales YoY), 0.1% (new listings YoY), 57.2% (active listings YoY)

    - West Palm Beach, FL: $265,000, 1.9% (median sale price YoY), -11.2% (pending sales YoY), -8.6% (sales YoY), 4.0% (new listings YoY), 42.0% (active listings YoY)

    - U.S.: $355,073, 3.9% (median sale price YoY), -5.5% (pending sales YoY), 1.1% (sales YoY), 2.8% (new listings YoY), 27.1% (active listings YoY)

    Several factors are contributing to the decline in demand for condos and increase in inventory in Florida and Texas:

    - Surging HOA fees in Florida: HOA dues have increased more than 15% in Tampa, Orlando, and Fort Lauderdale compared to last summer. They have also risen more than the nationwide average in West Palm Beach and Jacksonville due to the Surfside condo collapse leading to additional maintenance requirements for condos and rising insurance costs. Some buyers in Florida and Texas struggle to find homeowner coverage at all as insurance companies leave the states. These rising costs, along with natural disasters themselves, are scaring off condo buyers and motivating condo owners to sell. Rising insurance costs also impact single-family homes but condo owners are hit particularly hard because many condo buildings are on the waterfront where insurance costs are higher. Owners of single-family homes on the waterfront are more likely to have enough money to pay high insurance costs or pay cash to avoid insurance altogether.

    - Climate disasters contributing to soaring insurance premiums: Frequent and intense natural disasters in Florida and Texas are a major factor in skyrocketing insurance costs, which contribute 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. Those rising costs, along with the natural disasters themselves, are scaring off condo buyers and motivating condo owners to sell. Rising insurance costs also impact single-family homes but condo owners are hit particularly hard because many condo buildings are on the waterfront where insurance costs are higher. Owners of single-family homes on the waterfront are more likely to have enough money to pay high insurance costs or pay cash to avoid insurance altogether.

    - Investors have backed off: Real estate investors are less interested in condos than they used to be; nationwide, investor purchases of condos fell 3% year over year in the second quarter. Florida Redfin agents are reporting investors aren’t buying condos anymore; instead, those who bought condos to rent them out a few years ago 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, some of which were built in the wake of the Surfside condo collapse, which revealed that many older condo buildings on the Florida coast needed to be replaced. That’s adding to the surge in condo inventory, which is piling up as buyers turn away.

    Nationwide, condo sales are slow but prices are holding up:

    - Pending sales of condos fell 5.5% year over year in July, dropping to the lowest level of any July on record. For the sake of comparison, pending sales of single-family homes were essentially unchanged from a year ago.

    - The number of condos for sale rose 27.1% from a year ago, a major increase but substantially smaller than what we’re seeing in Florida and Texas. The mismatch in supply and demand hasn’t yet pushed down prices nationwide; the median condo-sale price is up 3.9% year over year.

    - The downturn in the national condo market is being driven by the downturns in the major Florida and Texas metros discussed above, as well as other Sun Belt metros like Phoenix and Nashville, TN.

    - Redfin agents in other parts of the country report slow condo markets, partly because of rising HOA fees. In San Jose, CA, for instance, condo inventory is up 50.7% year over year, and prices are down 3.2%. In Denver, pending sales of condos are down 25.4% and prices are flat.