Condo prices hit a record high– $319,000, up 14.6% YOY and 22.7% from before the pandemic— as buyers priced out of the single-family market turn towards more affordable options, Redfin reported.
This is a turn-around from the beginning of the pandemic when American buyers wanted to avoid crowded areas, causing condo sales to drop by 48%.
But as pandemic fears subside and home shoppers face stock shortages and price appreciation in the single-family market, condos are making a comeback.
Gen Z in particular is reviving urban hotspots assumed to be dying out due to Covid-19.
“Big cities are appealing for a host of reasons—big cities offer diverse job opportunities. Big cities offer many amenities that are not available in smaller cities or rural areas, from dining and entertainment options to public transit, to services like gyms and spas,” said Nicholas Dempsey, Associate Professor of Sociology at Eckerd College.
In major urban hubs like San Diego, Los Angeles, and Philadelphia, a quarter of rental applicants are Gen Z. And though many are renting right now, a majority of them, 86.2%, want to own a home one day, and of those, 45% are looking to buy their first home in the next five years.
If home price appreciation doesn’t level out soon, the condo market might look especially attractive to this generation.
“People are no longer afraid to live downtown, close to the crowds–and they often prefer it, because they’re close to the office and all the amenities of the city,” said Chance Glover, a Redfin manager in Boston.
“Rising prices are pushing single-family homes out of reach for a lot of buyers, so condos are affordable in comparison.”
Compared to single-family homes, condos are still relatively cheap. Home prices hit $406,000 in February, up 34.9% from pre-pandemic numbers, and mortgage rates recently broke 4% for the first time since 2019.
They also face less competition, for the time being. Of offers on single-family homes, 72.9% faced at least one other offer in February, compared to 64.6% of condo offers. However, that is up from 49.3% a year earlier. If single-family supply continues at its current rate, condo competition could stiffen further.
Already, condo prices have risen thanks to the same stock shortages plaguing the single-family market. Condo supply was down 28% YOY in February, a bigger jump than single-family’s 14% YOY decline.
Condo sales were still up 13% from February 2020, while single-family sales stayed flat through that period.