• As the market heated up for single-family homes in 2020, the condo market cooled, with rising inventory and a higher share of listings with price cuts.
• Median sales price for condos rose year-over-year, but fell behind single-family homes.
• Condos may provide an attractive entry point for those looking to own, especially in heated markets.

Housing market performance in urban and suburban areas was broadly similar in 2020, but the nation’s condo market failed to keep pace with the single-family home segment across a broad range of indicators last year. It could indicate that while our preferences for where to live may not have changed much during the pandemic, the type of homes we prefer may have.

Sales and price growth for condos ended 2020 generally lower than for single-family residences (SFRs) while inventory levels were generally higher, according to a Zillow analysis of listing and price data. Still, it remains to be seen how permanent these shifts will be in the face of sky-high housing demand and the enduring affordability of condos for a large pool of buyers eager to get a foot in the door, unfazed by condos’ cozier space and perhaps attracted by the sometimes amenity-rich condo lifestyle.

There was a considerable year-over-year spike in for-sale condo inventory nationwide compared to single-family inventory starting early summer 2020, a potential sign that condo-owners were vacating their homes and trading up for more space and privacy. Even so, this year-over-year increase in condo inventory happened in the midst of steep overall inventory declines, potentially providing homebuyers with modestly more options in a tight market. 

Echoing the national trend, annual growth in condo inventory exceeded growth in SFR inventory in 48 of the nation’s 50 largest metro areas. New Orleans and Charlotte were the only exceptions.

Around the same time as inventory levels were rising, the share of condo listings that had at least one price cut also rose above that of SFR listings — the first time that occurred, since at least early 2019, offering further evidence of a softening condo market. 

This trend was also mirrored in many local markets, most notably in several west coast metros. In Seattle, the share of condo listings with a price cut was more than 50% higher than the share of single-family homes by October (21% compared to 13.2%, respectively). The majority of California markets and some on the east coast also mirrored this trend, along with markets including Minneapolis, Nashville and Atlanta — an indication that the softening condo market was not only concentrated in dense coastal areas. 

Diverging median sales prices between condos and single-family homes offered another sign of softening. The median list price for condos nationwide ended 2020 slightly higher than SFRs, but growth in median sale price has slowed. Throughout last year, single-family homes fetched a consistently higher median final price than condos, but the gap began widening last fall as year-over-year growth in condo prices flattened while SFR prices kept surging. 

These differences in list price and sale price may be partly explained by composition differences between listings and sales counts for these two markets. When broken out by value tier, the largest year-over-year increases in for-sale condo listings were in the highest value tier, even as overall condo inventory began to rise. In other words, there were relatively more higher-value condo listings on the market than less-pricey options, contributing in part to condo’s higher median list price. That could be explained in part by where these condo listings were — in general, listings of condos in typically more expensive urban areas grew more than more-affordable suburbs or rural areas, also contributing to higher list prices.

On the sales side, annual growth in sales among the highest-priced single-family homes exceeded growth in other segments, explaining the recent rapid increase in overall SFR sale prices as relatively more, more-expensive, homes sell. For condos, annual growth rates were broadly similar by the end of the year for all but the lowest-priced segment, where growth lagged behind. But these small differences weren’t enough to bring the overall condo median sale price to single-family levels. It is interesting to note that while growth in overall median sales prices for condos is plateauing, the gap in annual sales growth between the highest valued tier and the rest of the condo market has closed.

Condo communities in different markets are responding differently to the pandemic and a softening market. In some metro areas, including Las Vegas and Houston, condo fees — also known as HOA fees or dues — have risen. In other areas, including Washington, DC, Baltimore and other east coast markets, condo fees are falling. These fees often cover maintenance and other costs associated with condo-specific amenities including pools, gyms and community centers — perks that are generally attractive to many buyers, but which may be closed, limited and/or more expensive to operate during the ongoing pandemic.

Condos provide a unique opportunity for prospective buyers looking for a foot in the door, especially in markets where house prices have risen out of reach or where proximity to urban centers is a priority. Many of the factors that make a condo lifestyle attractive to many, including more-communal living and easy access to desirable amenities including gyms, pools and community spaces, may have lost some of their shine during the pandemic. But in a post-pandemic world, it is likely these amenities will come back in full force and again become an attractive selling point.