Single family residences (SFRs) have long been the ultimate goal of the American Dream. But dreams evolved and preferences changes. Homebuyers are increasingly willing to consider condos or townhomes in California and across the U.S. more broadly, according to a new study by Redfin.

89% of homebuyers still report a preference for SFRs, but they are increasingly willing to include other options in their home search. At the end of 2019, 33% of searchers nationwide limited their searches to SFRs only, following a steady downward trend from 41% who limited their search to only SFRs in 2012.

Closely related, the SFR premium over comparable condos has shrunk in recent years. In Los Angeles at the end of 2019, the average SFR cost 19% more than a comparable condo or townhome, down from a 27% SFR premium in 2013. In San Jose, the SFR premium has decreased to 25%, down from 31% in 2013.

At least part of the shift is due to today’s significantly higher home prices. Some homebuyers just can’t qualify for the SFR premium and are forced to choose between buying a lower-priced condo or attached home, or else abandoning the coveted American Dream and continuing to rent.

Other reasons for the increased interest in condos are related to demographics. Many Millennial homebuyers prefer the greater walkability and proximity to urban amenities and jobs that condo life offers. At the other end of the age spectrum, retiring Baby Boomers also tend to prefer the low-maintenance lifestyle of condo-living when they sell their large suburban SFRs to relocate to be closer to family.

What do these changing preferences mean for real estate professionals in California’s housing market?

Related article:

Young adults: the condo generation?

Show them the options

Homebuyers are becoming more flexible, with roughly 2-out-of-3 homebuyers willing to include a variety of options outside of the traditional SFR in their home search. As a real estate professional, you are uniquely situated to take advantage of this information.

Agents who practice in mixed areas with both SFRs and condos/townhomes need to become familiar with all types of properties. Gain an “in” in desirable condo communities when possible. Take tours of communities and ask for meetings with condo association presidents and property managers to get the inside scoop. Become the expert of the shared amenities and communal features the condo property likely comes with, as you’re selling the ownership of these attributes just as much as you are selling the property itself.

Share your insider information with clients — this is the very information and knowledge your clients want and need from their licensed representation. Offer up the most desirable condo communities as possibilities, even when your homebuyers may not have thought beyond purchasing a traditional SFR. They may end up being happier with the benefits and amenities offered by a condo or townhome, particularly when they visit one in person and are told of the advantages they will have access to as members of the community.

Further, familiarize yourself with the unique mortgage rules and restrictions for condos. For example, in 2019 the Federal Housing Administration (FHA) began processing approvals for single units. Previously, the FHA needed to approve the entire project for a single unit to qualify.

In California, expect to see condos continue to gain popularity. Since our state’s major metros are already built out horizontally — evidenced by extreme traffic and commutes — the only way to grow is up. As local zoning laws have resisted this reality, legislators at the state level have needed to step in to ensure continued growth. Several new state laws encourage more multi-family construction, especially for low- and moderate-income households. Read more about these new laws here.