Condos are Back in Style
After a season of buyers seeking single family homes, the condo is making a comeback.
There’s no doubt that the COVID-19 pandemic changed real estate. As working and schooling from home became the norm, Americans began looking for more space and privacy. In 2020, condos sold for a 17 percent discount when compared to single family houses.
Families found extra space by moving from more urban areas to more suburban ones. That often meant abandoning smaller apartments or condos in favor of single family houses. Single family home prices soared with demand for yards, extra bedrooms, and more space. They were also helped along by record low mortgage interest rates.
Since the COVID-19 vaccine rollout, people have begun returning to a degree of normalcy. While single family homes are still coveted, condos are coming back in response to market pressures. As workers return to the office, condos provide a chance for city living and the convenience that comes with it. There are changes already happening and more on the horizon. Now, the condo is making an epic comeback.
Lifestyle and affordability make condos appealing to buyers
As 2021 wraps up, schools are largely back with in-person classes. In-person work is already becoming common again. Many companies plan to return to the office in early 2022. With those changes come a shift back to an easier, more compact lifestyle.
Redfin recently found that home prices in cities rose 16 percent, “surpassing suburban and rural price growth for the first time since pre-pandemic.” This signals a shift back to more compact living situations, conveniently close to work and other amenities that cities offer. A recent Realtor.com analysis of home sales data found that there were also twice as many condos sold in May 2021 as there were in May 2020.
Affordability is a driving force behind this trend, especially as single family housing prices creep ever higher. The entry point to condos is often lower than single family houses. Although homeowners association (HOA) fees increase monthly payments, condos are typically priced lower than single family properties. This equates to a lower down payment, attracting those looking to buy instead of rent.
Buyer behavior shifts as millennials enter the market
More and more millennials are purchasing homes. Over the next few years, they will become the driving force of house purchases in the United States.
While Millennials did push for more space (indoors and out) during the pandemic, they have other preferences as well. Many value walkable communities, a feeling of community, and affordability. Those with student debt feel that single family homes are out of their price range.That squeeze between price and space can make condos an ideal option, especially to get a foot into the home buying door and start building equity.
Condos meet the needs of this demographic for a variety of reasons. The main benefits of condos include:
- Affordably priced options when compared to single family homes.
- Less upkeep than a single family home because the HOA handles exterior maintenance in many cases.
- Many include amenities such as a shared fitness room, pool, or playroom.
- Located in more urban, walkable areas, offering great convenience.
While condos may offer parking, they also are often built in high-density areas where parking is at a premium. Millennials love that things like restaurants and bars and coffee shops can be easily reached on foot.
Investors are beginning to notice the shift as the world opens up and buyer behaviors change. Condos present new opportunities for astute investors.
Condos offer a chance for investors to get creative
In certain markets, condos are the first thing to go down in value during economic hardships. Appreciation also lags in comparison to single family properties. Given this information, it’s not surprising that many investors stay clear of condos.
Real estate investors underestimate the potential upside of condos. For those willing to think outside the box, flipping condos can be very rewarding. Recently, a 1 bedroom, 1 bathroom condo was put on Sundae’s marketplace. Being a condo, a very small one for that matter, it received four offers. In contrast, there are instances where single family houses have received up to 35 offers.
Knowing the trend towards condos, one investor decided to take advantage of this lack of competition in the space. The investor was able to purchase the property for $221,500 and proceeded to renovate the property. Afterwards, it sold for $325,000.
By spotting what other investors were missing, he made a gross profit of $103,500. The bottom line: investigate how condos perform in your market and act accordingly.
Keeping up with the latest trends
There will always be a hot new real estate trend — and it’s good to keep up on what’s driving the market and where prices are trending up or down. You’ll also want to understand how those trends might affect your exit plan. Regardless of your strategy or location, our team of dedicated investor advisors can help you get the most of your experience. Learn how to win big on Sundae’s marketplace and capitalize on newly emerging trends.