Investors’ condo purchasing has dropped to one of its lowest levels in the past 10 years — in a shift driven largely by their retreat from Florida, a new study shows.
The analysis, conducted by real estate brokerage firm Redfin, examined county-level home purchase records across 39 of the most populous U.S. metropolitan areas dating to 2000. Investors bought about 8,500 condos in the first quarter this year, down 3% year over year to the lowest level in 10 years. That is, with the exception of the second quarter of 2020, when “the start of the pandemic nearly ground the housing market to a halt,” Redfin said.
Contributing to the decrease has been Florida’s surging association fees and rising insurance costs “amid the increase in climate-driven natural disasters,” according to Redin. “Additionally, many of Florida’s condo buildings are oceanfront, making them particularly vulnerable to climate disasters.”
‘A safer bet for investors’
While condo purchases have dropped 3%, other purchases have been holding steady: Investors’ purchases of U.S. homes increased 2% year over year in the first quarter.
Greg Eisinger, a partner at the Eisinger Law firm, which focuses on real estate law, said that’s no surprise: “If I was an investor, I probably would look for single-family housing over condominiums,” Eisinger said. “I think that’s the safer bet for investors these days.”
Eisinger said one reason why condo purchases are down is because people are concerned about an increase in the number of hurricanes weathered by Florida, where there are many beachfront condos.
John Cadden, managing principal at Condominium Advisory Group, said the decline in the condo purchases also has been caused by interest rates on condos doubling in the past few years. Cadden’s advisory group consults condo associations from around the state that are facing issues.
“When interest rates started going up, that had more effect than the pandemic itself,” he said.
Boosting safety
New safety guidelines were enacted after the 2021 collapse of the Champlain Towers South condo building in Surfside that killed 98 people.
Condo associations also have raised fees to cover inspections of older buildings and reserve a set amount of funding for maintenance and future repairs, as required by the Florida Legislature. The changes were enacted to improve safety, but contributed to the rising costs.
“Most associations try to keep the dues current while not increasing their expenses,” Eisinger said. “But now kind of everything has come to a head, and they have no choice.”
In April, the Florida Legislature passed a bill that would give associations more time and flexibility while they gather funding to meet the reserve requirements. Gov. Ron DeSantis is expected to approve it.
Florida condos’ dwindling popularity may ultimately benefit some buyers who’d face less competition — but only to a certain degree. “Florida bounces back,” said Cadden, from the advisory group. “It’s still a place for people to move to. It’s still a growing state.”
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