Real Estate Blog

• Condo sales taking longer than detached homes to sell.
• Average 30 yr. fixed rate hovering between 6.5% and 6.75%.
• Market tipping in buyers' favor, finally.  Discounts from list price increasing.

What was once the ideal stepping stone for buyers who are unable to afford a detached home for their first purchase, condos and townhomes are getting more expensive to buy and own.  Orange County condo and townhome inventory is up 17% over last year, according to local economist Steven Thomas, while demand is down 8%.  Detached home inventory, for comparison, is down a more modest 11% while demand is down 6%.  Expected Market Time is 114 days for attached homes and 93 days for detached homes.  This gap is the largest it's been in years.  Why would this be?   Not surprisingly, it's the HOA dues and related costs that are causing most of this separation.   

Senate Bill 326 requires condo associations to inspect and retrofit, if necessary, any wood-supported balconies, which has caused more than a few associations to make special assessments, while conventional lending can be withdrawn prior to the satisfaction of these new requirements.  Increasing insurance costs in California have had a further impact on HOA dues, causing an affordability knock-on affect.  Plus, starting in January 2027, HOA reserve requirements will increase from 10-15% of the annual budget for Fannie Mae and Freddie Mac loans  (70% of condo loans).  This will cause a monthly dues increase or a special assessment for many associations.  All of these financial implications are causing downward pressure on condominium affordability and therefore sales volume.  

If you're currently shopping for an attached home with HOA, and want to know the health of its HOA, ask the listing agent.   Buyers typically get a full set of HOA docs to review (including CC&Rs, meeting minutes, AND the all-important budget and annual audit), but they don't get this until  they open escrow.   A good listing agent will have access to most of these documents from the seller beforehand.   Similarly, I recommend having your mortgage lender look into any HOA complex you're considering before you get too attached to the home.  You want to be sure you can get a loan there.  Remember that balcony inspection requirement?  Associations that haven't been able to satisfy the inspection and retrofit requirements are temporarily are causing buyers to seek alternative financing (read:  higher interest rates).  Your great agent can fill you in on all of this.  If they don't, find a great agent!

Until next time, 

Matt

949 677 3618

Tags

• condo challenges (1)
• condo values vs. detached home values (1)
• balcony inspections (1)
• homebuying (1)
• HOA docs (1)