Why Are Condos Crashing So Hard?
Serious delinquencies jumped by 16,000 in August alone, while foreclosure activity continues climbing with 23,000 more loans in active foreclosure compared to last year.
Meanwhile, the condo bubble is finally deflating, with prices dropping 12-27% across 25 major cities as reality sets in.
Even major homebuilders like Lennar are feeling the pinch, slashing their average selling price 22% from peak levels back down to pre-2019 prices just to keep sales moving.
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Delinquencies Up on Calendar Effect; Foreclosure Activity Trending Higher
Serious delinquencies (loans 90+ days past due but not in foreclosure) rose by 16,000 in August and are up 32,000 year over year, while loans in active foreclosure increased by 3,000 for the month and 23,000 since last year.
Condo Prices Dropped by 12%-27% in these 25 Bigger Cities through August
From the beginning of 2020 through mid-2022 condo prices had exploded in many of these cities by 50%, 60%, or more than 70%, in just two-and-a-half years, forming fantastic condo bubbles, and now these bubbles are deflating.
Institutional Investors Retreat from SFR Acquisitions But Maintain Pricing Sway
While institutional acquisition volume is down, the presence of these buyers still distorts normal price discovery. Even as some portfolios are trimmed, market dynamics continue to favor those with capital and agility.
Lennar Cuts Average Selling Price Below its 2019 Level, and its Home Sales Held Up
Lennar’s average selling price in Q3 dropped by 9% year-over-year to $383,000, below where it had been in 2019, and by 22% from the price peak in Q3 2022, when FOMO-addled buyers were willing to pay whatever because money was free.
Fewer Renter Households Can Afford Homeownership
With more renter households unable to afford homeownership, CBRE forecasts that multifamily occupancy rates will remain higher than historical averages for years to come. This in turn will put upward pressure on near-term rent growth as multifamily supply and demand rebalances.
