Declining sales, low price growth, and high inventory makes for a great time to buy a condo. But not necessarily a good time to invest in one.
If you follow my blog, you know that I don’t spend a lot of time on Condos and Townhomes. Not that they aren’t great places to live in, but they don’t always make great investments due to their high $/SF and HOA fees. Unfortunately these condo reports are generated slightly differently than the monthly market reports, so I’m going to reference the latest housing report I reviewed here for comparison.
Per the report executive summary, year-over-year (YOY) sales of condominiums “decreased 9.8% to 11,875 sales, while townhome sales declined 0.2% to 8,616 sales”. They attributed the decrease to an abundance of supply, which is a little odd, given that demand is what impacts sales (supply impacts price), but whatever. These numbers are for all of Texas, but comparing this to the 12% YOY sales growth of Austin homes in August, you start to see a pretty stark contrast. Condos also saw just a 1.6% median sales price increase, with townhomes an even lower 1.3%, compared to Austin’s 11% YOY increase. Everyone, has their theories of course, but I see suburban home growth being the #1 factor.
ADOM | MOI
Y’all know I like to look at Average Days on Market (ADOM) and Months of Inventory (MOI) to tell the real picture. They do publish this data for Austin, and we’re going to focus only on Condos, as Townhomes are such a small percentage of the market. Condos averaged 54 days on the market, as compared to the current 42 days on the market for houses. But it’s with inventory that we see the biggest difference for investors. Condos currently have 3.2 months of inventory as compared to 1.4 months for houses. This is a HUGE spread and makes all the difference in the world on sales price.
So are Condos and Townhomes a Good Buy Right Now?
The numbers will tell you we’re in a buyers market on Condos/Townhomes for sure (Low volume + high ADOM + high MOI = buyer’s market). This is great if you’re in the market for a Condo. It doesn’t necessarily mean these are a good investment. I’d be OK with ADOM and MOI if I also saw volume and price growth. But the fact that we’re not, tells me it will be some time before the condo/townhome market picks up from an appreciation perspective. And we know they’re already tough from a cash flow perspective (due to high HOA fees), so without the appreciation, I just don’t see much potential right now.
Source & Credit: Texas Condominium Sales Report