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Over the past year, Denver Metro’s condo and townhome market has been quietly slipping, and not just in sales volume. Prices for attached properties have been steadily declining, and the reasons go far deeper than simple supply and demand. One of the biggest drivers is rising HOA fees and skyrocketing insurance costs. For years, many condo and townhome complexes carried “master insurance policies” that covered exterior maintenance, including roofs, in exchange for higher monthly HOA dues. Owners could carry a cheaper HO6 “walls-in” policy, making ownership costs predictable.
That has changed.
Due to Colorado’s weather-related insurance losses, many insurers have either pulled out of the market or drastically raised premiums on complexes with exterior coverage. Faced with unsustainable costs, a number of HOAs have dropped exterior coverage entirely or switched to higher-deductible plans. This forces owners to buy more expensive HO3-style policies, similar to single-family homes to get roof coverage, in addition to paying moderately increasing HOA dues.
But that is only half the problem.
New Fannie Mae and Freddie Mac lending rules made effective in 2024 require master policy wind deductibles to be no more than 5% of the policy limit. Many HOAs (including the management companies and volunteers on the Board), unaware of the changes, now carry deductibles above that limit. This makes entire complexes ineligible for many traditional mortgage products, especially those with lower down payments or first-time buyer programs.
The result is:
- Many buyers simply cannot get financing for those units
- The buyer pool shrinks to cash purchasers or those with significant down payments
- Sellers are forced to drop prices significantly to attract the few qualified buyers
- Equity is quickly declining for condo/townhouse owners
Some complexes are already dealing with a double hit from pending HOA litigation, deferred maintenance, or low reserve issues that further limit financing options. Meanwhile, price per square foot for properties under $375,000, which are mostly condos and townhomes, is now among the lowest in the local market despite higher monthly costs.
What does this mean for owners? If they own a property in an affected complex, selling in the next few years could be challenging unless your HOA addresses the deductible issue at their next renewal or is able to find a solution to insurance costs.
I’m letting my attached property owners know that if they plan to sell, they should get these details from their HOA early on. For agents, we need to take the time and effort to find a lender willing to review and approve the complex’s insurance policy and other potential lending barriers in advance of marketing the property and to avoid fallen contracts. Many agents won’t do this, but it’s the best way to support and provide expertise for these property owners.
Do you have a condo, townhome, or other HOA property and want to help making a plan to sell, let’s make a gameplan together and pick a time here to start that process.
Sources:
https://selling-guide.
https://guide.freddiemac.com/
https://recolorado.stats.
https://recolorado.stats.
