Are condos the future of housing?

Castles in the Sand

In case you haven’t noticed, interest rates are low, real low. Most rates for a 30-year fixed-rate mortgage are hovering around 4% based on credit scores and income to loan ratios. In spite of this, condo financing has always been somewhat of a poor stepchild to single-family home financing. New condo construction loans have been especially vulnerable to government regulations, but now The Federal Housing Administration has issued some new guidelines making available more advantageous condo financing programs.

FHA is trying to be more responsive to market conditions as well as accepting that condo units are being viewed more broadly as a way to provide affordable housing in many markets. Generally, single-family homes may not be accessible for first-time buyers and others who are trying to gain access to homeownership and condos nicely fill that need.

The new regulations are geared for new condo construction primarily but will also have an effect on the availability of condos for first-time buyers. Among other changes is one that has been a big issue for condo builders and that’s the owner-occupancy rate. The new FHA regulations have lowered the number of owner-occupancy rates as low as 35% from 50% before individuals can qualify for financing in new condo construction.

Condos are a big deal in Florida and in Manatee County. Although the number of condo sales was down in September for Manatee County, the sale prices were up, so let’s take a look at the county overall:

In September Manatee County closed 15.2% more single-family homes than last September. The median selling price for single-family was $315,000, 6.8% higher than last September. The average sale price was $381,577, 9.6% higher than last year.

Condo sales in September were down 8.6%, but the median sale price was up 6.7% to $199,000 and the average sale price was also up by 16.1% to $244,587. Both single-family and condos are low in inventory with the single-family home months supply at 3.3 months and condo months supply at 3.8 months. As a reminder, 5.5 months supply is the benchmark for a balanced market.

Sarasota County is also showing some increases in sales and pricing for single-family and condos. The median sale price for single-family in Sarasota increased by 6.4% to $298,000 and for condos, the median price decreased slightly by 1.8% to $232,000.

Statewide single-family homes reached a median of $265,000, an increase of 5.3%, and an average of $339,862, an increase of 4.9%. Condos statewide also increased with the median selling price at $193,000, a 5.8% increase, and an average of $261,532, a 1.3% increase.

All county and statewide statistics are from the Realtor Association of Sarasota and Manatee website.

Evidence continues to mount that condo sales will play a more significant role in the mortgage origination market in the next few years, according to CoreLogic. With a flood of millennials and other first-time homebuyers expected to soon enter the market for affordable housing, CoreLogic foresees a rising demand for condos in the near future.

Millennials aside, Florida is a hot market not only for retirees but homeowners relocating to a tax-friendly state with a lot of new construction and fundamentally great weather. But if you’re starting to think of relocating to the Sunshine State, you better get moving. Inventory is low, prices are high and interest rates are still historically low. Come on down!

More Castles in the Sand:

The ghosts of real estate

You found the perfect house; now what?

Is homeownership threatened?