The U.S. condo market is undergoing a sharp and widespread correction. In 20 major cities, prices have declined between 10% and 23% from their peaks—unwinding years of appreciation and signaling a shift in residential real estate. While Florida, Texas, and Arizona are seeing the steepest drops, the trend is national—and it may have broader implications for the single-family rental market.1
A Market That Moves First
Historically, condos tend to lead price movements in residential real estate—both on the way up and on the way down. They are often the first segment to show stress in a changing market, and that’s exactly what we’re seeing now. In cities that saw the most dramatic run-ups during the pandemic-era boom, prices are reversing quickly.2
Nationally, condo prices posted a year-over-year decline in March 2025—the first in over a decade. In places like Naples, FL, median condo prices fell 2.7% over the past year, even as single-family home prices rose nearly 7%.3 Rising HOA fees, insurance premiums, regulatory burdens, and oversupply have weighed heavily on demand and slowed transaction volume.
Investors and Buyers Backing Away
Investor purchases of condos fell 3% in Q1 2025, and nearly 70% of condos sold below list price—the highest rate in five years.4 Many investors are offloading their holdings, citing poor rental yields and increasing costs.
Owner-occupants and prospective landlords are cautious as well. High rates, tighter lending standards, and the risk of further price declines have made condos a less attractive option. Listings are growing faster than sales, creating downward pressure on prices and giving buyers more leverage.
What It Could Mean for Single-Family Rentals
The question is whether this downturn is contained—or whether it’s the early signal of a broader market shift. There are signs that single-family rentals may be next:
• Inventory is up nearly 20% year-over-year, reducing urgency among buyers and softening price momentum. Zillow now forecasts a 0.7% national home price decline by mid-2026.5
• Rent growth is slowing. After years of rapid increases, single-family rents are expected to grow just 2.8% in 2025.6 Higher vacancy rates and increased supply are creating headwinds.
• Investor sentiment is cooling. The rapid decline in condo values highlights how quickly the investment outlook can shift, especially for properties acquired at peak pricing with tight margins.
• Lower mortgage rates may lead to continued drop in price. If the Fed lowers interest rates, this may increase liquidity in the market as sellers are willing to accept a lower price to trade into a replacement property in a better market with cheaper debt. This may likely take place in areas with lower cap rates and higher regulation, like California and New York.
Final Thoughts
The condo market has historically been a bellwether for broader housing trends, and it may be trending that way again. Many sellers have been waiting on the sidelines trying to time the market. However, there are indicators that there is still room for single family housing prices to fall.
Many seller may choose to withdraw their listings and sit on their historically low interest rates, and wait out the downturn. But others, in heavily regulated markets, or those who are worn out by the headaches of active management: tenants, toilets, and trash…it may be far less appealing. For those looking to step away from active management, pre-packaged 1031 exchange options, like Delaware Statutory Trusts, can offer a way to retire from landlord responsibilities while gaining exposure to real estate asset classes that may be positioned differently in the current market cycle compared to single-family housing.
LEARN MORE ABOUT 1031 EXCHANGE
1 https://wolfstreet.com/2025/06/19/the-condo-bust-is-here-prices-dropped-already-10-to-23-in-20-bigger-cities-unravel-the-most-splendid-condo-bubble-ever/
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3 https://www.naplesed.com/post/naples-florida-condo-market-problems-in-2025-why-sales-lag-single-family-homes
4 https://www.redfin.com/news/investor-home-purchases-q1-2025/
5 https://www.fastcompany.com/91355943/housing-market-map-zillow-updated-home-price-forecast-for-400-cities-markets
6 https://www.zillow.com/research/home-value-sales-forecast-33822/
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