Homeowner Costs Spiraling Out of Control
The crisis is exacerbated by homeowner association fees and skyrocketing insurance costs, placing additional financial burdens on Florida residents.
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These costs contribute significantly to the strain on homeowners, making it increasingly difficult for them to manage their financial obligations in maintaining their properties.
A Lack of Buyers
While condo prices plummet, the influx of associated costs is pushing buyers away from Floridian real estate.
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According to a Redfin study, the median sale price for a condo in the Tampa metro area dropped 1% year-on-year. However, sales fell 4.1% during that period, and new listings jumped by 27.3%.
A Widespread Trend
According to the study, the story is the same all over the Sunshine State.
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The Orlando metro area saw sales rise by 6.6% in the last year. However, new listings jumped by 23.3% year-on-year. The only exception was North Port, where median sale prices for condos only rose by 7.1%
Condos Are Harder to Sell
A Tampa Bay broker associate, Barbara Schmal, said condos are becoming harder to sell.
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“I have never seen it this bad. We do open houses, we can’t get people to come to open houses, none of the agents that have buyers are even wanting to show the property, and it’s making our sellers very, very nervous,” said Schmal.
Domino Effect in the Housing Market
Steven Kupchan, an agent for One Sotheby’s International Realty, told the Daily Mail, “In the worst-case scenario, a significant number of condo associations could go bankrupt due to the inability to cover the costs of necessary repairs and maintenance.”
Source: Steven Kupchan - Miami Real Estate/Facebook
This potential bankruptcy could trigger a series of financial failures within the housing market.
Impossible to Get Viewings
Brokers like Schmal find it nearly impossible to book showings for open houses.
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“I currently have five listings in the 55 and older communities. The longest one I’ve had on the market, which I listed back in August, it’s been on the market for 151 days, and we’ve had three showings,” said Schmal.
Foreclosure Fears and Plummeting Values
The potential fallout is severe. “Widespread foreclosures, plummeting property values, and a ripple effect throughout the local real estate market,” could be imminent, Kupchan suggests.
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This scenario paints a grim future for property owners across the state.
New Laws, New Pressures
In response to past tragedies, like the Champlain Tower collapse, Florida has introduced stricter safety regulations for condos.
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This new legislation mandates more frequent safety checks but also increases financial pressures on already burdened residents.
Tighter Regulations on Real Estate
Condo associations across Florida now face a deadline for the new year to have an engineer inspect their buildings for safety.
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These engineers will tell associations how much money they will need to set aside for potential repairs.
Saddling Homeowners with Millions
The sudden costs of an inspection and any necessary repairs could land condo associations in millions of dollars of debt they cannot pay off.
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After countless calls from constituents, lawmakers are even calling for the Legislature to convene in a special session to modify the new regulations before the regular session in March.
A Special Sessions Turned Down
Writing to state senators, Senate President Kathleen Passidomo shot down the idea of a special session.
Source: Kathleen Passidomo/X
“Let me assure you, I hear the anger and frustration of condo owners,” said Passidomo. She went on to insist that “no law is perfect” and warned against rushing reforms. Passidomo said upcoming committee meetings and the spring legislative sessions would provide the best opportunity to deliberate and hear out “all stakeholders.”
The Exodus Has Begun
As the crisis deepens, there’s a real concern about a large-scale departure from affected buildings.
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“If the crisis deepens, there could be a mass exodus of residents from affected condo buildings, leading to a glut of unsold properties and further declines in prices,” Kupchan explained.
Millions of Condos Affected
Florida has more than 1.5 million residential condos, and an estimated 2 million people live in condos that are 30 years or older.
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Not everyone can purchase a condo along with up to $20,000 in immediate repairs. Maybe it is no surprise that the number of condos and townhomes on the market has shot up by 92% as sales have fallen by 20%.
Rising Insurance Costs Complicate Purchases
The situation is further complicated by insurance challenges.
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“Insurance companies could refuse to cover certain buildings or raise premiums to unsustainable levels, making it difficult for buyers to obtain financing,” Kupchan said.
Insurance Price Skyrocketing
Insurance prices have soared, forcing residents to consider whether they can afford to insure their homes.
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According to the Insurance Information Institute, Master Condo Association Policies are increasing by 100-500% right now.
Market Contraction and Financial Pressure
These developments suggest a tightening of the market and increased financial pressures on existing owners.
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The escalation of costs and the potential decrease in market activity could lead to a significant contraction in the real estate market, affecting property values and homeowner stability.
Shifting Buyer Preferences
With condos becoming less desirable due to these issues, there is a noticeable shift towards single-family homes.
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This shift could significantly alter the dynamics of the Florida real estate market, changing what types of properties are in demand.
Drastic Price Reductions Amid Crisis
In an attempt to circumvent looming large-scale repair costs, condo owners have been drastically reducing prices.
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In some extreme cases, prices have been cut by up to 40%, as owners hope to sell off their properties before incurring further losses.
Condo Prices Plummeting
The difficulty of maintaining a condo in Florida means that the price of real estate is falling at a staggering speed.
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A report from Florida Realtors shows that the median price of a condo in January 2024 was $205,000 compared to $220,000 at the same time last year.
Personal Impact on Residents
The crisis has had a profound personal impact on residents like Karen Shipman, who purchased a condo in Venice, Florida for retirement.
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Facing rising costs, Shipman told ABC Action News, “I feel like it’s paradise lost now,” highlighting the emotional and financial toll the crisis has taken on many individuals.
Launching Residents into Uncertainty
Shipman is anxious that she may be priced out of the condo that she and her husband bought to be their last home.
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“Sometimes I’m not sure this will be our last home because our condo fees have gone up, and mainly insurance is a big factor,” said Shipman.
Future Uncertainties in the Market
The long-term impact of these changes and the current state of the market remains uncertain.
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As regulations take effect and market responses unfold, the real estate landscape in Florida is expected to continue evolving, potentially leading to further challenges or opportunities for stabilization.
An Unpredictable Climate
Kupchan believes the Floridian condo market will only become more volatile and will affect “other sectors of the real estate market.”
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The regulations have launched the Sunshine State’s real estate market into uncertainty and disarray. The only way forward is to wait for the Spring legislative section to hold these reforms under harsher scrutiny.