Whether you’re looking for a long-term investment and want to make sure you’re not buying a money sink or you’re thinking about buying your first home, it’s important to choose the right property type. Right now, interest rates and housing prices are still high across the board, but some types of homes could lose value in the next 12 to 18 months.
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This could be good news if you’re a prospective buyer and want something affordable for the long term. But it could also be problematic for sellers and short-term investors alike. After all, plummeting prices mean lower 5 Cities You Need To Consider If You're Retiring in 2025 for both.
GOBankingRates spoke with 9 Things the Middle Class Should Consider Downsizing To Save on Monthly Expenses experts about the types of homes they expect to lose value by the end of next year. While these are only predictions and anything can happen, here’s what they said.
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Condominiums were once extremely popular, particularly with retirees and those who wanted a vacation property with less upkeep. But they might be falling out of favor with buyers, and demand just isn’t keeping up.
“I believe that condos in many places have a higher likelihood of losing value over the next year. This will be primarily due to an oversupply of this type of housing in certain markets,” said Danny Johnson, real estate expert at Danny Buys Houses Texas. “Condos have been the housing type of choice for many builders for a while now. It’s a simple matter of supply and demand.”
According to Alex Capozzolo, a licensed Realtor and co-founder at Brotherly Love Real Estate, apartments located in urban areas could also plummet in value. This is primarily due to oversupply, higher vacancy rates and lower demand as more people work remotely.
“With the rise of remote work arrangements, individuals and families are no longer tied to living near their workplace or city center,” he said. “As a result, there may be a shift away from urban areas towards suburban or rural locations, where housing prices are typically lower.”
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With the increasing popularity of new constructions, those traditional stick-built homes you see in all of those old neighborhoods could also lose value. This is especially likely for older homes.
“The one type of home that is consistently seeing new construction is large homes in suburbs and exurbs. While brand-new homes of this type are quite expensive — one of the reasons they keep being built is that they’re so profitable — homes that are 10-30 years old in suburban areas are having a hard time holding their value,” said Martin Orefice, the CEO of Rent To Own Labs.
“This could make them great buying opportunities for aspiring homeowners, but at the same time, it could be bad news for retirees using home equity as a nest egg.”
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A luxury home is any property that’s priced around two to three times the local median home price. These homes are currently in high demand, which has led to an oversupply in certain housing markets. Because of this — and because of high interest rates and overall fewer buyers able to afford such homes — Capozzolo believes they’ll see a price reduction, too.
“As luxury homes are often purchased by wealthy individuals for investment purposes or secondary residences, any fluctuations in the economy or financial markets can greatly impact their purchasing power,” he said.
Even affluent buyers might hold off on buying these homes and opt for more affordable options — though, as with everything else, it depends on the market and buyer.
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A lot of people work remotely, but local unemployment rates can still affect housing prices. The higher the unemployment rate, the greater the potential value loss. If the locals are already struggling to make ends meet, it might — due to lower demand — lead to lower home prices.
“The uncertainty of the job market and the financial instability faced by many households further exacerbate the decline in the real estate market,” said Brandon Beatty, real estate expert at Ready House Buyer.
This makes it tricky for buyers trying to find an affordable home and current homeowners who want to get the most out of selling theirs.
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According to the Federal Reserve Bank of St. Louis, the average home sales price is just over $500,000. You can find much cheaper homes, particularly in rural or less populated areas, but even then, the idea of getting a second or vacation home is out of reach for many.
Capozzolo believes these types of homes will lose value in the coming years.
One of the biggest reasons for this is simply that more buyers are being cautious about their purchase decisions. If they already have a primary residence, they may choose to stick with that, rather than buy a secondary property for seasonal or vacation purposes. This is especially plausible since, depending on where it’s located, that second property could come with high insurance and maintenance costs.
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This article originally appeared on GOBankingRates.com: 5 Types of Homes Expected To Plummet in Value by the End of 2025
