With a warming housing market mirroring local weather patterns, one segment of the market seems to be outperforming others. Local condo sales can legitimately be termed as hot – here’s why.
The market for single-family homes is uniquely competitive right now. There is an extreme undersupply of active listings compared to buyer demand, leading to multiple offers, short market times and escalating prices. King County residential sales from Q1 reflect these trends. The quarter ended with 17% fewer single-family home listings than there were a year earlier, and as a result the March median price of a sold home in King County had climbed 13% year over year, to $945,500. Multiple offers for new-on-the-market listings were the norm, setting the median sold price 3% above list.
By contrast, the condo market has 19% more active listings than it did a year ago and fewer multiple-offer scenarios. March’s median sold price for King County condos was $540,000, up a manageable 6.5% from a year ago. But last month’s sold price also came in 2% under the median asking price, and only 26% of sold condos closed above asking price, indicating that most sales were based on single and not multiple offers.
Despite less competition for each available unit, 17% more condos sold in the first quarter of 2024 than the same period last year: 1,238 units. In fact, the condo market accounted for a full 35% of total residential-plus-condo sales, versus a typical 30% share in the past.
So what factors are driving the popularity of condos in our region? There are several, chief being supply, price and interest rates. Even though these factors work together to make a condo purchase an easier target for many buyers, let’s explore each of them separately.
First, supply. King County buyers looking for a single-family home are hampered by the residential market’s persistent lack of inventory and the resulting pressures that puts on price and buyer performance. Single-family home listings are sparse and hard to acquire. With a better relative supply, condos require less competition, a little less urgency and a lot less heartache.
Next, let’s consider the impact of price. The median price differential referenced above – $945,500 for a single-family home versus $540,000 for a condo – is significant. But consider, too, the contrast in monthly payments these different property types require. A current model that considers mortgage rates and median prices shows the March monthly payment for a single-family home at $6,177 (principal plus interest). By contrast a median-priced King County condo would require a payment of $3,528. This represents a big gap in affordability for the average King County household, and it seems to be growing.
That leads us to examine the impact of mortgage rates. Last March the average rate for a 30-year fixed rate loan was around 6.5%, whereas last month it was 6.8%. Rising rates influence affordability and how much monthly payment a non-cash buyer can manage; they are especially felt when financing higher-priced properties. This explains why the residential payment referenced above is up 16% from a year ago, whereas the condo payment is up less, at 10%.
Even buyers seeking a space with four separate walls or a yard for their pet may be influenced by these trends. The condo market, experiencing rising prices and payments just like the residential market, still has better relative supply and affordability. And in this frenzied market season when buyers are competing hard against each other, the ability to slow down a bit and compete a little less may further swing some buyers into the condo column in the months ahead.
