Challenges at the Intersection of Condos, Lending, and Insurance

March 18, 2025

A recent article in The Wall Street Journal (March 17, 2025) highlighted a growing challenge for condo owners—rising insurance costs and tightening lending requirements—that could impact their ability to sell when the time comes. While the issue is gaining more attention nationally, it’s especially relevant in Denver’s condo market, where homeowners’ associations (HOAs) are navigating steep insurance hikes while buyers face new lending hurdles.

Why Insurance Costs Are Rising

The past few years have seen a notable increase in natural disasters—wildfires, hurricanes, hailstorms, and tornadoes—which has led insurance carriers to reassess risk and raise rates accordingly. Between 2020 and 2023, the median property insurance premium in Colorado rose by 42.1%, reaching approximately $2,574. This surge is attributed to escalating environmental risks, with Colorado experiencing the fourth-highest insurance losses in the U.S. over a five-year period leading up to 2023. However, the rising costs aren’t just about higher premiums; insurers have also started limiting coverage in critical ways.

Impact on Condo Associations:

The heightened insurance premiums have placed a strain on condominium associations (HOAs). Many HOAs struggle to afford comprehensive coverage, leading to potential underinsurance.

For example, many policies now cover roof replacements at depreciated values rather than full replacement costs. This means that when a condo owner (or a single family home owner as well) submits a hail damage claim, their insurance might only cover a percentage of the replacement cost, leaving them responsible for a significant portion of the repairs. In the case of large-scale damage affecting an entire condo complex, this could translate into massive expenses passed down to homeowners in the form of special assessments—a financial burden many don’t anticipate.

Tighter Lending Standards and the Role of HOAs

As insurance costs surge, lenders are also becoming more cautious about issuing mortgages for condos that may be underinsured. A growing number of mortgage lenders are now requiring HOA-managed condo buildings to carry more comprehensive insurance coverage before they’ll approve loans for buyers in those communities.

The challenge? Many HOAs are struggling to balance affordability with risk management—and increasing insurance coverage often comes with steep premium hikes. If a lender determines that a condo building is underinsured, they may deny financing for buyers altogether, restricting the pool of potential buyers to those who can purchase with cash.

For condo owners looking to sell, this can present a serious roadblock. If a property is no longer eligible for traditional financing, it can reduce demand, prolong days on market, and affect pricing.

What This Means for Condo Owners in Denver

Denver’s condo market has always been dynamic, with strong buyer demand in sought-after locations like Cherry Creek, LoHi, and the Highlands. However, in a market where affordability is already a concern, condos with higher HOA fees or uncertain insurance coverage could face challenges when it comes time to sell.

If you’re a condo owner thinking about selling, don’t despair. Condos can still sell well in today’s market, but success requires strategic preparation:

✅ Know your HOA’s insurance coverage – Get ahead of potential roadblocks by understanding whether your building meets current lending standards.
✅ Price your condo correctly – With financing challenges affecting some buyers, strategic pricing is more important than ever to attract serious offers.
✅ Work with an experienced real estate agent – Having a knowledgeable agent who understands the nuances of condo sales, HOA considerations, and lending criteria can help position your condo competitively.

Every real estate challenge comes with opportunities, and the right strategy can help you successfully navigate this evolving market. If you have questions about rising insurance costs and tightening lending requirements – and how it may impact your ability to sell when the time comes – let’s connect and create a plan tailored to your goals.