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The condominium market is small when compared to the single-family home market with 64 condominiums selling in 2022 compared to 321 single family homes. There are few standalone condominiums (for example in 2 or 3 family dwellings) in Lexington. Both existing and new construction condominiums tend to be grouped into “communities” that offer many shared services. Providing these services typically raises the condominium fees.Average condo association fees in 2022 were $600/month and the fees charged for new construction developments were 2% higher at $614/month. Interestingly the average condo association fee in 2021 was $525, a 15% increase in 12 months. If we compare these fees with Arlington, which had 229 condominium sales in 2022, primarily 2/3 family homes, and an average condo association fee of $252/month (5% less than in 2021), we can begin to see why even with a lower average sale price the Lexington condominium market is considerably weaker than the single-family market.

Condominium Sales

The number of condominiums sold in 2022 was 64 compared to 77 in 2021. The sales are generally split into two groupings.he older developments – Potter Pond (1980’s), Fifer Ln/Drummer Boy Way (1970’s), Emerson Gardens (1960’s) etc. and the newer developments – Lilly Pond Ln (2021/2022), Jefferson Dr (2019/2020), Robinson Rd (2018) etc. Given this split, in prior years, we see a relatively static number of existing condominium sales with the new development communities driving the peak in sales volume when they come on the market.

2021 changed this picture with 66 existing condominium sales but in 2022 it returned to the trend seen in prior years of 45-55 sales.

Sale Price to List Price Ratio 2022

One of the strongest indicators of demand and realistic pricing is the ratio of the sales price to the list price. An average ratio of over 100% means that there was competition, resulting in buyers paying more than the asking price. The Lexington condominium market has seen this indicator at approximately 100% throughout 2013-2021. 2022 saw this indicator rise to 104% when we aggregate over the full year. This is not the full story though. As noted previously, the second half of 2022 was considerably weaker than the first half and is being masked by aggregating over the full year.Looking at the ratio of the sales price to the list price on a month-by-month basis provides more details of how the market changed in the second half of 2022. The indicator dropped (to below 100%) as the year progressed and the impact of even higher interest rates impacted buyers’ ability to afford repayments. The fluctuations seen in these values are caused by a lower number of condominium sales in each month. For example, only 2 condominiums sold in October 2022.

Average Sale Price (New Developments)

The average sales price for new construction condominiums has been rising since 2013, consistent with the overall housing market. The low averages seen in 2014 and 2018 were because there were no new condominium developments in those years and the very few new construction condominiums were one-off duplex units.

Consistent with the large increase in single family new construction prices we saw a 20% rise in average price in 2021. This rate of increase declined to 1.8% in 2022 implying that perhaps a plateau in new construction condominium prices has been reached. We have not seen the same price appreciation in condominiums when compared to single family homes. In 2017 new construction condominiums were 37% cheaper than new construction single family homes. By 2022 this had increased to 51% as new construction single family prices rose to $2.92 million.

Average Sale Price (Existing Condominiums)

Between 2017 and 2020 the average sales price for existing condominiums showed a worrying trend. We saw a 5% reduction in the average sales price in this period. Prices did rebound in 2021 and increased 11%, when compared to 2018, to an average of $805,000.Following the theme of this analysis it is worth analyzing average sale prices in the first and second half of 2022. Prices increased 11% in the first half of 2022 when compared to 2021 (consistent with the sale price to list price ratio over 100% during this time). In the second half of the year the average declined with the average sale price only 1.8% higher than 2021. Aggregating over the full year gives an average of 6% price increase.

We believe that high condominium association fees were the key reason for the poor performance of the condominium market in the 2017 to 2020 time period. If we compare the Lexington to Arlington condominium markets – average sale price and average floor area are comparable – but, the average condo association fee in Lexington is over double the corresponding average fee in Arlington. With the effects of COVID diminished and stability returns to the housing market we expect the slower price appreciation to return in the condominium market.
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