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Rising Insurance Costs Hitting Condos Hard

By
Real Estate Agent with Keller Williams Capital Properties DC AB15253

Rapidly increasing insurance premiums are putting pressure on community associations and their members.  In a 2023 survey of condo associations, 91% said that their insurance premiums increased at the last renewal.  The increase in insurance premiums is a major factor behind rising condo association fees. Condo dues rose 20% between 2022 and 2024, according to an analysis of 1,800 associations in 44 states by real-estate tech company Rexera. 

The rise in these costs is squeezing homeowners when home-buying affordability already hovers around its lowest level since the 1980s. Property taxes and home-maintenance costs are also climbing in much of the country.

Many condo associations have responded by passing the increase in insurance costs on to homeowners through increased dues or special assessments. This financial strain is leading some homeowners to consider moving rather than absorb the higher fees, which is understandable given the added financial burden.

For associations, the options mentioned—such as raising dues, using operating funds, or even taking out a line of credit—show the lengths they are going to manage these increased costs.   However, the increased fees are not easily absorbed by individual homeowners.  When too many homeowners fall behind in their condo fee payments, the condo association may have to consider foreclosure in order to recoup the lost fees.  At a minimum it may put a lien on the condo in order to ensure that the fees will be repaid if the owner sells the property.  For individual homeowners, especially those already struggling with payments, the prospect of foreclosure due to unpaid fees adds another layer of concern.

The challenges facing condo and townhome owners, as outlined, highlight several significant issues impacting affordability in these communities:

  1. Rising Monthly Fees: Increased insurance premiums and other operational costs are leading to higher monthly fees for condo and townhome owners. This can make these properties less attractive or affordable, especially for first-time buyers and retirees on fixed incomes who are often drawn to these housing options due to lower initial purchase prices.

  2. Rapidly Increasing Home Prices: The sharp rise in home prices, nearly 50% since the end of 2019, further exacerbates affordability concerns. This trend not only affects prospective buyers but also puts recent homeowners under financial strain, potentially limiting their ability to absorb additional costs like higher monthly fees.

  3. Impact of Mortgage Rates: Mortgage rates around 7% add another layer of financial pressure, making borrowing more expensive and potentially deterring buyers who rely on financing to purchase homes.

  4. State Regulations and Compliance Costs: Specific state laws, such as those in California and Florida requiring older buildings to meet new structural safety standards, are imposing additional expenses on condo owners. Compliance with these regulations can lead to significant costs that are passed down to homeowners through increased fees or assessments.

Given these challenges, it's understandable that some condo owners may consider selling and moving to more affordable housing options or locations. For those looking to stay, it could be beneficial to explore options such as renegotiating insurance policies, advocating for more flexible payment plans from associations, or seeking out financial assistance programs if available.

Navigating these financial pressures requires careful consideration of individual circumstances and proactive communication with community associations and financial advisors. Are you or someone you know currently dealing with these issues firsthand, or are you seeking more information on how to manage these challenges effectively?  If you are having problems with your condo association  in the DC Metro area, I would love to talk with you.  I can be reached at 240-401-5577 or by email at lise@lisehowe.com.

 

Brian England
Ambrose Realty Management LLC - Gilbert, AZ
MBA, GRI, REALTOR® Real Estate in East Valley AZ

Having a high condo fee is one of the detriments to owning a condo over a single-family home, although the maintenance still needs to be done to a single-family home, haha.

Jun 19, 2024 06:44 AM
Carol Williams
Although I'm retired, I love sharing my knowledge and learning from other real estate industry professionals. - Wenatchee, WA
Retired Agent / Broker / Prop. Mgr, Wenatchee, WA

Hi Lise,
Our recent Zoom presentation revealed many concerning issues with condo ownership. Rising insurance costs are definitely one of the biggies, along with all the other factors you mentioned.

Jun 19, 2024 06:57 AM
Michael Jacobs
Pasadena, CA
Pasadena And Southern California 818.516.4393

Hello Lise - no one is exempt.  

Jun 19, 2024 06:59 AM
Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

Brian England at least if you own your own home, you can save for those repairs and hopefully schedule them according to your budget  (although I just had to replace two air conditioning units on the same day for my house and an investment property - which was very painful!) 

Jun 19, 2024 07:41 AM
Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

Carol Williams  - that is absolutely the case!  I am sorry that I missed that zoom call! 

Jun 19, 2024 07:42 AM
Bill Salvatore - East Valley
Arizona Elite Properties - Chandler, AZ
Realtor - 602-999-0952 / em: golfArizona@cox.net

Yikes on the rising fees.  My SIL just got hit with a $40,000 roof assessment, great information. Thanks for sharing it.

Have a super fantastic week!

Bill Salvatore, Realtor- Arizona Elite Properties

Jun 19, 2024 08:01 AM
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Lise and just thinking of you of not seeing a blog lately from you.   Great information that you are sharing with us here in the Rain.  Make it a great day!

Jun 19, 2024 08:13 AM
Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

Will Hamm - despite my best efforts somehow I keep getting busy.....

Jun 19, 2024 08:46 AM
Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

Bill Salvatore - East Valley - that is positively painful! I hope they are getting a long time to pay that off

Jun 19, 2024 08:47 AM
Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

Good morning Lise,

OMG..what a powerful post with a relevant message to be getting out there. I mentioned a struggle I'm having with a condo listing on the Zoom call. We still are in the throws as the condo association bought a cheaper master insurance policy with less coverage and they are finding it now fails to meet lenders guidelines! 

Jun 19, 2024 10:01 AM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Lise, those insurance rates are increasing, and SO fast.   Many are moving from attached properties for that very reason.

Jun 19, 2024 04:54 PM
Endre Barath, Jr.
Berkshire Hathaway HomeServices California Properties - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Lise Howe  how sad, here in California Insurance companies are leaving not wanting to pay out for fires.... Now interestingly in Europe they do forest management, and they have fewer fires.... just a thought, Endre

Jun 19, 2024 10:55 PM
Michael Elliott
Fathom Realty - Burlington Township, NJ
Burlington, New Jersey Residential Sales

I have heard about this .  Seems the only thing not going up is the death benefit on my life insurance. 

Jun 22, 2024 02:32 AM
Roy Kelley
Retired - Gaithersburg, MD

This is good information to share with prospective condo purchasers.

Keep cool and have an outstanding weekend.

Jun 22, 2024 06:48 AM
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

My daughter’s HOA just announced they needed to access each unit $435 to cover an Insurance Shortfall …………..

Jun 22, 2024 09:01 AM
Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

Hi Lise... I haven't seen a huge influx of condo listings as yet, but I'm sure they are coming. The HOA fees are making many unaffordable for buyers.

Jun 22, 2024 01:03 PM
Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

Hi Lise:

Rising insurance costs are hitting condo and single family home owners, coupled with some insurance providers leaving the state and leaving homeowners to struggle with finding new, and costly, insurance. Our wild-fire season is well under way and I expect there will be more fall-out insurance-wise as a result.

Jeff

Jun 22, 2024 05:39 PM