Experts say the desire for condominiums could heat up if the price of single-family homes continues to rise.
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While the sales prices of U.S. condos increased by 5.4% compared to a year ago to a median of $266,000 in August, single-family home prices surged 11.9% to $343,000, Redfin said.
Now, condos and single-family homes are seeing the "largest price-growth gap between the two property types since 2014," according to the residential real estate company's latest report.
The reason why condos saw "sluggish" price growth is in part because they are less desirable among homebuyers who have been more motivated during the pandemic to bid on homes that typically offer more space and privacy, Redfin said. Additionally, the number of condos that buyers have to choose from has also increased.
In August, the supply of condos for sale in the U.S. increased 3.6% on a seasonally adjusted basis. At the same time, the number of single-family homes plummeted 26%.
Not only is there high inventory and minimal buyer demand, but condos are also not seeing much competition, Seattle Redfin real estate agent Jessie Culbert Boucher said.
About 41.3% of condos faced bidding wars in August, compared with 56.6% of single-family homes.
"If prices of single-family homes continue to surge to unsustainable levels, condos may make a comeback, as they could become the only type of home that buyers in some areas can afford while also avoiding intense bidding wars," Redfin lead economist Taylor Marr said.
In August, condo sales climbed 11.8% on a seasonally adjusted basis. Redfin noted that this figure not only outpaced the 10.8% increase in sales of single-family homes but surpassed the pre-coronavirus (February) growth rate for the first time.
Meanwhile, the desire for single-family homes has already started to decline slightly, according to Redfin, which analyzed saved searches from users on Redfin.com.
According to its data, about 34% of Redfin.com users had filtered exclusively for single-family homes in September, which was down from a peak of 37% in July.
The slight downtick in interest has already indicated that living in a "single-family home is becoming less of a priority for house hunters," Redfin said.