The Housing Market Is About to Hit Rock Bottom: Here’s How it Will Impact your Association

August 24, 2023
Posted in Blog
August 24, 2023 Sasha Cancél

Housing markets rarely stand still, but the potential of hitting rock bottom has lately been whispered with increasing urgency in the halls of the real estate industry. Recent reports and opinions by prominent market analysts, such as Redfin CEO Glenn Kelman, have amplified this term across the press too, signaling that we’re closer to this reality than in past years.

Mortgage rates have soared to their apex since 2001, echoing the economic downturn of the 1980s. Freddie Mac reports the 30-year fixed rate at 7.09%, a dramatic 150% jump from last year’s 2.86%. This surge amplifies existing recession fears, creating anxiety in the housing market and for prospective homebuyers.

With mortgage rates continuing to surge and the median home price reaching heights 44% higher than pre-pandemic levels, associations managing condominiums need to prepare for a complex landscape.


How will it impact associations?

  1. Declining Sales and Stagnation

With sales volume subpar and the industry recovery slower than expected, associations might notice a substantial slowdown in property turnover. Fewer new homeowners mean a stagnant community, which can lead to a decline in property value (and less financial flexibility for HOAs).


  1. Increased Financial Pressure on Homeowners

High mortgage rates combined with rising home prices have strangled many buyers, while existing homeowners might find it difficult to refinance or sell. Associations may need to brace for increased delinquencies or default on assessments, placing a financial burden on the entire community.


  1. Change in Demographics

A significant shift in buyer profiles, with Asian buyers comprising 38% of total new owners and Latin Americans at 31%, can bring changes in community dynamics. Associations must remain aware of these shifts to ensure continued harmony and relevance in their governance structures, catering towards respecting individual traditions while fostering a communal sense of wellbeing.


  1. Affordability Crisis

Higher house prices and expensive apartments may lead to “arrested development” in household formation; social mobility and ownership have reduced, leading to less household formation and a slowed progression in the housing market. Associations may need to consider long-term strategies that encourage families to invest in their communities.


ONR Recommends: Strategies to Mitigate Impact

  1. Flexible Payment Methods

To accommodate homeowners who may struggle financially in the changing market, associations might consider implementing flexible payment methods for assessments. This approach can help maintain community cash flow without putting undue stress on individual owners.


  1. Reassess Budget and Financial Goals

Associations should conduct a thorough review of their financial plans. Adjustments may be necessary to align with the new reality of the market. Ensuring a robust reserve fund can also provide a safety net for unexpected challenges.


  1. Engage in Community Building

During times of uncertainty, fostering a strong community spirit can make a significant difference. Associations can organize events and initiatives to keep residents engaged and committed to their communal living environment.


  1. Invest in Quality Property Management Tools 

Quality property management tools can lead to increased efficiency, streamlined operations, and a better understanding of the unique challenges faced by associations in this market environment. Collaborating with skilled professionals armed with top digital tools may help in navigating the rocky terrain.


  1. Communication and Transparency 

Keeping homeowners informed and engaged is vital. Transparency in financial matters, future plans, and day-to-day operations will maintain trust and cohesion within the community.


  1. Monitor Regulatory Changes

Given the considerable shifts in the housing market, legislative changes may follow. Associations must keep an eye on local, state, and federal regulations that may affect their operation or financial standing.


The housing market’s journey to the bottom is loaded with complexities that require a careful and measured response. Associations, Property Managers, and Management Companies must align their strategies with the changing tides, recognizing that the impact can be both far-reaching and subtle.

In charting a path through these unsteady waters, proactive, flexible, and resilient associations will be best positioned to weather the storm. By understanding the trends and crafting targeted strategies, they can turn challenges into opportunities for growth and community development. With preparation and insight, associations can build a strong foundation for the future.