Like other sectors of the mortgage market, the condo space has seen a slowdown due to high interest rates
Like other sectors of the mortgage market, the condominium market is seeing struggles in parts of the country due to the continued high interest rates. One Phoenix-based mortgage originator attributes the slowdown to high rates and homeowner association (HOA) fees.
Jeremy Schachter (pictured top), branch manager and mortgage originator with Fairway Independent Mortgage Corporation in Phoenix, Arizona, has seen the market cool while potential buyers wait for lower interest rates.
“I am definitely seeing a slowdown in condo purchases in the Phoenix metro market,” Schachter told Mortgage Professional America. “I am on a monthly home tour that exclusively shows only condos in downtown Phoenix, and all the realtors who go on these tours say the same thing. Many of the realtors mention limited or no showings, low-ball offers or no offers at all.”
The most recent figures from the National Association of Realtors (NAR) for March revealed a 5% decline in condominium and co-op sales compared to the same period a year ago. It also showed a 1.5% price increase, with the median existing condo price at $363,000.
In addition, the NAR report showed a 5.5-month supply on the market, the highest inventory amount since a 5.6-month supply in September 2024. The inventory increased from 149,000 available in February to 175,000 in March.
The numbers for April are expected to be released within the next week, and they will likely tell a similar story.
HOA fees also causing buyers to hesitate
Schachter notes that it’s not just high interest rates driving buyers out of the market, but high HOA fees.
“With elevated rates going on well into a fourth year, the condo market has definitely taken a hit due to the economic challenges,” Schachter said. “You have many condos on the market with high HOA fees. Combine this with interest rates, and the mortgage payment is well beyond many buyers' budgets.”
Another issue increasing is the lack of warrantable condos, meaning buyers can’t use Fannie Mae or Freddie Mac for mortgages. Recently, 1,400 condo buildings across Florida were deemed ineligible for traditional mortgages due to structural and maintenance issues.
“Many HOAs who oversee condos don't understand the importance of having a warrantable condo,” Schachter said. “From limiting the investor saturation of buyers to having healthy financials. Combine that with insurance rates going through the roof and non-renewals on master policies.”
Like other sectors of the mortgage industry, the turmoil caused by the tariffs has brought affordability issues to the condo market.
“Condos come with HOA fees, and if prices increase on consumer goods, buyers tighten up their wallets,” Schachter said. “The freedom of a condo with a lock-and-go mentality or low maintenance advantages is overshadowed by high HOA and mortgage payments.”
Not only is the market tightening budgets for individual buyers, but it is also doing so for HOAs. This is causing them to turn to condo owners to cover shortfalls, according to Schachter.
“HOAs do not have enough reserves and are putting on special assessments, additional costs, to existing homeowners to continue maintaining the complexes,” he said. “This includes deferred maintenance such as painting and upgrading the common grounds.”
Strict requirements make financing challenging
Schachter said many HOA management companies and residents don’t understand how strict Fannie Mae and Freddie Mac requirements are as it relates to condo financing.
“With the collapse of the Surfside Condo complex in Florida in 2021, Fannie Mae and Freddie Mac implemented stricter rules as well as non-negotiable questions that they require to ensure the HOA is well-managed,” Schachter said. “Some HOAs in the Phoenix market that I encountered refused to answer required questions from Fannie Mae and Freddie Mac due to legal reasons per their counsel.
“There are some workarounds to this, but the HOA has to work with the lender to give the necessary documents. Some refuse to do so, and then the condo becomes unwarrantable.”
Credit availability for mortgages backed by Fannie Mae and Freddie Mac has hit a record low this year – and Trump administration cuts to the government-sponsored enterprises (GSEs) are threatening to weigh against the US housing market’s recovery.https://t.co/9tgV12jMZX
— Mortgage Professional America Magazine (@MPAMagazineUS) May 16, 2025
Once condos become unwarrantable, Schachter means buyers either have to turn to cash offers or non-QM loan solutions, which can come with higher rates and down payment requirements. He believes both can end up pricing out first-time homebuyers who have limited funds or are on a tight budget.
For brokers navigating condo challenges, Schachter advises them to collaborate with listing agents in advance to streamline the buying process.
“I always recommend listing agents to order a condo certification form when they go live on the market,” Schachter said. “Their preferred lender can get the complex approved before any buyers make offers. Some lenders are more strict than others, and having at least your preferred lender approved for the complex ensures that if one lender can't do the mortgage, you have a backup.”
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