In the early days of the COVID-19 pandemic, many people left small apartments in urban areas and headed to the suburbs to buy larger single family homes. However, with recent trends in the market creating a more expensive housing market, California is seeing an increased demand toward condominium properties. With the COVID-19 demand for houses creating competition in the market, homebuyers have largely shifted their attention to condos, a recent report from Point 2 shows.
“Homebuyers all across the U.S tend to have a clear preference for single-family homes. However, their skyrocketing prices, combined with rising mortgage rates, have made many buyers reconsider condos. Although this is a newer trend, as long as single-family home prices remain elevated, buyers will not give up on condos, which are now seen as the more affordable option, offering people a chance at homeownership,” Andra Hopulele, who authored the study, said.
The report, titled “A Tale of 2 Markets,” showed how the national preference toward condos has now created a slight shift in prices for both condos and single family homes. While prices, overall, have begun to stabilize, condos have seen less contraction overall. According to the report, prices for condos have only contracted by 4.4 percent across the nation, while single family home prices decreased by 8.6 percent nationally.
At the same time, condo prices decreased in 65 of the 100 largest U.S.markets, while single family home prices fell in 88 markets. Condo prices also grew in 33 of the largest cities, whereas single family home prices increased in just 10 markets.
In California, the largest condo price drop was seen in Stockton at a decrease in 29 percent. Prices for condos in Stockton have dropped from $252,500 in May to $180,000 in October 2022. Likewise, three other cities saw condo prices fall more than 15 percent during the same time period. However, California also saw condo prices grow in three California cities, with Bakersfield seeing the largest increase at 12 percent. In Fremont and Santa Ana, prices increased by six and three percent, respectively.
Single family home prices decreased in all 16 of the largest California cities included in the study. Los Angeles and San Francisco saw the largest price drops at 18 percent for both markets. Fremont and San Jose saw declines of 17 percent and 16 percent, respectively. Other major cities, including San Diego, Chula Vista, Oakland, Anaheim, Sacramento and Long Beach, saw prices for single family homes drop by anywhere fro 10 to 15 percent.
“Prices for houses started falling more rapidly compared to condo prices, nationally and in California as well. Compared to the spring months, prices for houses fell in 88 of the 100 largest U.S. cities, while condo prices only fell in 65 markets. In California, house prices fell in all 16 of the cities included in the study, while condo prices actually kept going up in three cities: Bakersfield, Fremont and Santa Ana,” Hopulele said.
These trends in the housing market are likely due to the increasing demand for condos, which at the same time, is keeping prices for condos relatively high and causing condo prices to fall much more slowly. Despite these shifts in price, condos overall remain a more affordable option for most.
While figures show that homebuyers continue to be in favor of condos, Point2 also notes that these trends also have the potential to change as interest rates cool down and single family home prices continue to drop.
“Given that there are so many things happening at the moment, events and trends that definitely have an impact on the economy and the housing market as well, it’s tough to say where the condo and single-family market will be headed next. Interest rates have eased up a bit, and this could be a great sign for buyers, but there are still many other factors that could influence the housing market and make it tip in favor of buyers or sellers,” Hopulele said.