Why Attached Units in Secondary Markets Are Seeing Appreciation Lags

Written by:

Rudi Davis

Date:

22 Jan 2026

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The affordable housing crisis in many secondary markets is worsening unexpectedly: condos and townhomes, once reliable entry points for first-time buyers, are becoming unaffordable due to rising monthly costs unrelated to the purchase price.

Koby Bishop, a broker associate with The Group Real Estate in Northern Colorado, reports that surging insurance rates on attached units have driven HOA fees to record highs, often reaching $500 to $700 per month, an increase of several hundred dollars from just a few years ago. These elevated fees are now excluding many buyers from properties that were designed to be accessible.

According to Bishop, the impact is clear. Properties with manageable HOA fees continue to appreciate, but units with high HOA fees are losing ground, lagging the broader market or seeing little to no appreciation. For buyers hoping to enter homeownership through condos or townhomes, this creates a hazardous landscape where the wrong choice can result in a stagnant or depreciating asset.

Insurance Costs Drive Up HOA Fees

The main driver behind these rising costs is insurance. As carriers reassess risk, attached units — especially those sharing structures, roofs, and building systems — have faced steep premium hikes. These increased premiums are passed directly to owners through HOA fees, which serve as the mechanism for distributing shared insurance costs.

Unlike a higher purchase price, which can be financed over 30 years, HOA fees are a recurring monthly expense that directly reduces a buyer’s purchasing power. For example, a buyer who qualifies for a $2,500 monthly housing payment now finds a much smaller share available for mortgage principal and interest if $600 is required for HOA fees. This sharp reduction in buying power is pushing many would-be first-time buyers out of the attached unit market altogether.

Bishop explains that buyers are now caught between two difficult options. Many cannot afford properties where high carrying costs eat up most of their monthly budget, but they also lack the savings to buy a home and then spend thousands on renovations. “People don’t want projects,” Bishop says. “They don’t necessarily have the capital to buy a home and then do a full kitchen renovation like they maybe did in 2020.” Instead, buyers are prioritizing properties that are already updated and have lower ongoing costs.

As a result, demand is shifting toward single-family homes in neighborhoods without HOA fees and with lower property taxes. These very properties are in the shortest supply and highest demand. This shift is adding extra pressure to an already strained segment of the market, making it even harder for first-time buyers to find viable options.

Metro District Taxes Add Another Layer

Rising HOA fees are not the only recurring cost undermining affordability. Bishop points to another growing problem: metro district property taxes. In many secondary markets, new construction is often located within metro districts, special taxing areas that fund infrastructure by charging higher property tax rates.

“With new construction, a lot of them are in metro districts, which makes that tax base quite a bit higher,” Bishop says. For buyers comparing a new build in a metro district to an older home in an established neighborhood, the tax difference can be significant, often amounting to several thousand dollars more each year.

Just like HOA fees, these higher property taxes are not one-time expenses; they are ongoing costs that directly affect how much home a buyer can afford. A $500,000 home in a metro district can carry a higher monthly payment than a $525,000 home in a low-tax area, even though the lower-priced home appears more affordable at first glance. Many buyers focus on purchase price and fail to account for these recurring costs, leading to decisions that can become financially burdensome over time.

Bishop’s firm has responded by pricing homes based on their total carrying cost profile, not just comparable sales. “We look at comparable properties and who we’re pricing against,” Bishop explains. “If you’re a buyer, which one are you going to buy first?” Homes with high HOA fees or elevated taxes must be priced more aggressively to compete, he says.

A Two-Tier Market in Affordable Housing

The result of these rising costs is a two-tier market within what should be the most accessible segment of housing. Attached units and new builds with manageable carrying costs are still appreciating and attracting buyers. But properties saddled with high HOA fees or steep metro district taxes are stagnating, with some seeing flat or even negative appreciation.

This divide is not a temporary blip. Bishop argues that it represents a fundamental repricing of what buyers are willing to pay for homes with high ongoing expenses. Developers, lenders, and municipalities that have relied on attached units and metro district financing as pillars of affordable housing are now facing new challenges.

If attached units with high HOA fees continue to underperform, developers may build fewer of them, further limiting supply for entry-level buyers. If metro district homes struggle to appreciate, municipalities may find it more challenging to fund infrastructure using this model. Lenders who focus only on the purchase price, without fully factoring in carrying costs, risk putting buyers in situations where monthly expenses stretch their budgets from day one.

Bishop’s experience suggests that the affordable housing crisis in secondary markets is as much about the structure of homeownership costs as it is about supply and demand. Even if there are enough entry-level units, the wrong mix of recurring expenses can make these homes financially out of reach for the buyers they are meant to serve.

Buyer Counseling as a Solution

To help buyers navigate this complex landscape, Bishop’s firm has adopted a detailed counseling approach before clients begin their home search. “There’s a ton of counseling that goes into representing a buyer,” Bishop says. “We have a very in-depth buyers meeting before we start looking at homes.” This early conversation allows agents to understand the buyer’s goals and financial situation and to highlight properties with manageable total costs.

This approach is designed to prevent buyers from falling into the trap of purchasing a home that appears affordable upfront but becomes a financial burden due to high monthly fees or taxes. Bishop emphasizes that agents must now act as financial advisers as much as salespeople, guiding clients through the complete picture of homeownership costs.

Whether this model becomes standard practice depends on how quickly other brokerages and lenders recognize that purchase price alone is no longer a reliable measure of affordability. In markets where carrying costs are rising faster than incomes, those who can clearly explain and quantify the actual monthly cost of homeownership will have an edge.

Broader Implications for the Market

The trends Bishop describes are reshaping the entry-level housing landscape in secondary markets nationwide. Rising insurance premiums and higher property tax rates are making it harder for buyers to enter the market, even when there appears to be an adequate supply. The properties most affected — attached units and new builds in metro districts — are precisely the ones that were supposed to ease the affordability crisis.

In the future, the challenge for developers, municipalities, and industry professionals is to create affordable housing that remains affordable not just at the moment of purchase, but throughout the life of ownership. That means focusing on the total cost structure, not just the sticker price. As buyers become more aware of these hidden costs, the market will continue to reward transparency, careful financial planning, and properties with sustainable carrying expenses.

For buyers, the lesson is clear: in today’s market, understanding the full monthly cost of homeownership is more important than ever. For sellers and developers, success will depend on providing homes that deliver real affordability while keeping costs manageable month after month.