Condo Crisis: Why Florida’s Condominium Mortgage Market Is Imploding

Regulatory Shifts After Surfside Collapse

Florida’s condominium mortgage market is undergoing a severe downturn. For years, condos represented an accessible path to homeownership and retirement living. But today, many units are sitting unsold, devalued, or ineligible for financing. LBC Capital is seeing firsthand how lending conditions have tightened due to structural, regulatory, and financial pressures impacting the entire Florida condo ecosystem. The crisis isn’t isolated—it’s systemic, and it’s reshaping the way lenders and buyers approach this segment.

New Legislation Raises the Bar for Compliance

The tragic 2021 collapse of the Champlain Towers South in Surfside, which killed 98 residents, exposed serious flaws in Florida’s aging condo infrastructure. In response, the state passed laws mandating structural milestone inspections for buildings 30 years or older—or 25 years if located within three miles of the coast. These buildings must also maintain fully funded reserves to cover necessary repairs.

Most associations were not prepared. By the December 31, 2024 deadline, fewer than 25% of buildings had submitted proof of compliance. Many properties require costly upgrades to meet the new standards, and associations must now collect high assessments to fund those repairs.

Special Assessments Create Financial Shock

Special assessments are often sudden and substantial. In many older buildings, unit owners have received assessments ranging from $50,000 to over $400,000 per unit. These unplanned expenses are hitting retirees and fixed-income residents the hardest. Many have no choice but to sell—quickly—at deeply discounted prices.

LBC Capital has worked with clients who were blindsided by these costs. When associations can’t fund required repairs, lenders must step back. As a result, the market is seeing a sharp rise in distressed sales, declining values, and tightening underwriting guidelines.

Insurance Premiums Surge Across the State

Climate Risk Drives Higher Costs

Florida’s insurance crisis is another critical factor. As sea-level rise, flooding, and storm risks increase, so do insurance premiums. Updated FEMA flood maps and risk-based pricing models introduced in 2022 have pushed premiums up nearly 20% annually. In some cases, individual unit owners now face insurance bills that have doubled or tripled in just three years.

Many associations are also struggling to maintain building-wide policies, and some have been dropped by their carriers altogether. Without adequate coverage, a building is considered uninsurable—another major red flag for lenders.

Mortgage Financing Becomes Scarce

Ineligible properties can no longer secure conventional loans. Fannie Mae and Freddie Mac maintain a list of condo buildings that fail to meet minimum insurance, reserve, or structural criteria. As of mid-2025, over 1,400 Florida condo buildings appear on those lists. That means buyers interested in those units must either pay cash or secure non-traditional, higher-cost financing.

LBC Capital monitors these lists carefully. When a building is blacklisted, we cannot offer traditional mortgage options. This instantly limits demand and drastically reduces property values, creating a cascading effect throughout the community.

Inventory Floods the Market

Owners Race to Exit Aging Buildings

Faced with unmanageable assessments and vanishing equity, thousands of owners are listing their condos for sale. In Miami-Dade, Broward, and Palm Beach counties, active condo listings rose 45% to 70% year-over-year through the first half of 2025. Some buildings have over 30% of units for sale simultaneously—a red flag for buyers and underwriters alike.

LBC Capital has seen this surge reflected in appraisal data and market activity reports. With inventory rising faster than demand, price per square foot is dropping across the board.

Sales Activity Drops, Prices Fall

While listings soar, closings are declining. In Q1 2025, condo closings dropped by 9.2%, while pending contracts fell 13%. Buyers are hesitant, not just because of pricing but due to financing uncertainty, future assessments, and insurance instability.

Older condo units—especially those built before 1985—have seen value declines of up to 22% over two years. Even desirable beachfront properties are no longer immune.

Lenders Are Pulling Back

Fewer Approved Buildings Means Fewer Loans

Many Florida condos are now considered high-risk by mortgage lenders. Fannie Mae and Freddie Mac will not back loans in non-compliant buildings. As a result, many national lenders—and some regional ones—have stopped financing condos in South Florida unless the building meets rigorous reserve, inspection, and insurance criteria.

LBC Capital has implemented stricter due diligence for condo mortgages. We now verify reserve funding, pending assessments, building insurance coverage, and inspection records before issuing approvals.

Buyer Confidence is Eroding

The uncertainty has cooled buyer interest. Even buyers who can afford a mortgage are thinking twice before entering a building that may hit them with $100,000 in future assessments. Appraisers are also devaluing units in high-risk buildings, further limiting loan-to-value ratios.

These challenges are discouraging not just buyers, but also investors and developers. New projects are more likely to be luxury towers with full compliance and proactive reserve management, further widening the affordability gap.

Associations Are Under Strain

Financial Instability Risks Foreclosure

Many condo associations are now financially unstable. If too many owners default on special assessments or HOA dues, the entire association can fall behind on repairs, insurance, or utilities. In some cases, municipalities have stepped in to place liens or condemn buildings.

LBC Capital encourages associations to build strong reserve funds and communicate proactively with members. Transparency is key. Lenders like LBC Capital want to work with financially sound communities—but the margin for error is shrinking.

Bankruptcy or Takeover May Follow

If an association can’t meet its financial obligations, bankruptcy may follow. In these situations, units become even harder to sell or finance. In some cases, developers or private equity firms have begun buying up entire buildings at discounted rates, pushing out existing owners and redeveloping the sites for profit.

Uneven Impact Across Markets

New Construction Remains Resilient

While aging buildings struggle, new condo towers—especially those built after 2000—are faring better. They often meet reserve requirements, carry full insurance, and were designed to higher building codes. Buyers in these properties tend to have higher incomes and can better absorb rising HOA fees or insurance costs.

Regional Differences Are Emerging

Areas like Miami Beach and Naples are seeing the worst of the crisis, especially in older oceanfront buildings. Meanwhile, some inland developments in Tampa, Orlando, and Sarasota are holding steady, particularly when located in master-planned communities with active management and strong reserves.

What Buyers and Sellers Should Do Now

Buyers Must Do Their Homework

If you’re buying a condo in Florida, it’s more important than ever to do your research. Review building financials, reserve studies, inspection reports, and association meeting notes. Confirm the building is not blacklisted and is insurable. LBC Capital offers pre-qualification services that include a full condo project review before you make an offer.

Sellers Must Price Realistically

If you’re a seller, you may need to adjust expectations. Units in older buildings may require steep discounts to attract buyers. Offering to cover a portion of the assessments or HOA dues upfront may also help close the deal.

The Road Ahead for Florida Condos

Florida’s condo mortgage market is unlikely to recover quickly. Experts anticipate continued inventory growth, price compression, and tight lending through at least 2026. Unless there’s significant regulatory reform or insurance relief, many condo associations and owners will remain under pressure.

LBC Capital is committed to guiding borrowers through this complex environment. We help buyers identify viable properties, secure financing for compliant buildings, and avoid high-risk purchases. For sellers, we offer resources and guidance to improve property marketability and streamline closing.

Florida’s condo market may be in crisis, but with expert help and proper planning, there are still opportunities—especially for informed buyers working with experienced lenders like LBC Capital.