Bidding wars. Low inventory. Even lower interest rates. Skyrocketing home values.
These are just a few of the headlines that sum up the current real estate market. The data backs up the headlines, though. In June, the housing market saw a 23% increase in sales prices over 2020.
That leaves some looking to the condo market to buy a home instead of competing with cash buyers for a single-family home.
Are you going to find a much better situation there? Read on as we take a look at the condo real estate market to learn if there are opportunities there and what to look for in a condo.
What Is the Current State of the Condo Market?
That question is largely answered by the location of the person answering it. Overall, the condo market seems to be a better option than single-family units.
In 2020, people left cities in droves because they could sell a condo in a major city and get more bang for their buck in cities like Boise and Pittsburgh.
You could sell a two-bedroom condo in San Francisco or New York for a million dollars. That allows you to pay cash for a five-bedroom home elsewhere.
The problem with that scenario is that no one wanted to live in a crowded city during a pandemic. Many of those condos sat on the market for months.
The condo market was downright freezing compared to the red-hot single-family real estate market.
You’re not just seeing these trends in the United States. Cities like Toronto and Vancouver had similar issues.
All of that started to change this year. Toronto condo market sales jumped by 155% in the first quarter over the first quarter of 2020.
Condo sales prices went up by about 10% during the same period.
What’s driving this trend? First-time homebuyers.
They make up a significant part of the real estate market. Many of them are looking at a way to get into a home that’s affordable.
That’s hard to do when the average single-family home price hovers between $350,000 and $400,000. Condos tend to reach that point in urban areas.
Outside of those urban areas, they become a viable option. Interest rates remain at record-low levels, both in the US and Canada as the global economy looks to rebound.
According to Cameron Miller Real Estate, the seller’s market will continue into 2022.
Tips for Buying a Condo
The condo market is a lot different from the single-family real estate market. Buying a condo is a bit different than buying a home, too.
There are some similarities between buying a condo and buying a single-family home, too. Homebuyers should always start with their finances.
Take a look at your credit score. This is the one thing lenders look at. You need to a good credit score to get approved for a loan.
You might need to take some time to get your score up. A few quick things you can do are pay off your debts faster to lower your credit utilization rate. Make sure you make all of your payments on time.
A few points on your credit score can make a huge difference between getting a good interest rate and paying more for your condo.
Assess Your Budget
Hammer out your budget once you’re in the condo. New condo owners don’t realize the additional expenses of owning a condo.
For instance, you have to pay a community fee to the Homeowner’s Association (HOA). The HOA sets the rules and standards for the entire condo community.
They also take care of maintenance in common areas and exterior areas. HOA fees are usually a couple of hundred dollars to over a thousand a month.
There are also special assessment fees if the HOA has to make major capital improvements.
In the meantime, you’re still responsible for maintaining the interior of the home. You take care of the dishwasher, plumbing, and furnace.
It’s best to set aside about 3% of the purchase price for these unexpected repairs.
Working With a Real Estate Agent
A real estate agent that specializes in the condo market is an invaluable resource. They’ll know about the different HOAs, or they can find you the right luxury condo.
They also understand the various rules around condos. Many HOAs are comprised of board members that live in the condo community. They’re volunteers, but typical politics come into play.
The real estate agent will know which HOAs carry the most drama and which ones are run professionally. They’ll also know the condos that work with FHA loans and which ones don’t. This is critical for first-time homebuyers.
Get the Condo Documentation
Every condo association has a few documents that you should review before you put down an offer. Get your hands on the bylaws of the HOA and recent meeting notes.
These documents will tell you about major issues within the community and how it’s run.
The most important document to read is the Declaration of Covenants, Conditions, and Restrictions, or CC&Rs. This tells you what you can and can’t do with the property.
Even though you own a condo, you might not be able to rent a room out on Airbnb. Many have policies regarding pets, hanging lights outside, and virtually every aspect of the community.
Is This a Good Time for the Condo Market?
The condo market is definitely going up, thanks to first-time homebuyers looking for an affordable option in this real estate market. People are also looking towards a post-pandemic future, and they want to be in a central location.
It’s a great market for sellers and still a viable option for buyers. If you enjoyed learning about the condo market, you’ll want to read the other real estate articles on this site. Check them out today!