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There's something amiss in Florida's condo market.

"FLORIDA CONDO MARKET REMAINS IN CORRECTION MODE," Lance Lambert, co-founder of the ResiClub newsletter, posted at the end of last month, noting that condo prices were falling year over year in 18 metros in the state.

Another post last month from Nick Gerli , CEO of Reventure Consulting, a real estate analysis firm, showed that the estimated value of a St. Petersburg, Fla., condo was 41% below its pandemic peak.

"Talked to [the] realtor. She said it’s facing a $100,000 assessment due to structural work," Gerli later told me.

They may be onto something.

Overall, the median sales price of a condo in the state fell 1.3% in July, the latest figures available showed, marking the first year-over-year decline going back to at least July 2020, according to data accessible online from the Florida Realtors.

That's a far cry from the double-digit annual price gains racked up until November 2022, and the decline continues downward as inventory piles up and demand wanes. The fall from grace has even outpaced the softening single-family housing market in the Sunshine State.

Two of the major factors underpinning the decline — rising insurance costs and still elevated mortgage rates — are also pressuring single-family homes. But a third anchor — new condominium maintenance regulations that are increasing condo costs — is only weighing down condos.

Still, despite the state's well-known boom-and-bust real estate cycles, there's no condo wipeout on the horizon like that of the early aughts, experts say.

"It's a different situation. Prices are not cratering in any way," Lawrence Yun, chief economist at the National Association of Realtors, told Yahoo Finance.

"There may be some price reduction, but keep in mind after major appreciation in prices over the last four years, the price decline is inconsequential."

That may be, but if the depreciation continues, condo owners and buyers may get nervous.

Just like every housing market across the country, the Florida condo market is still transitioning to a new normal under higher mortgage rates. Potential buyers remain on the sidelines, waiting for rates to fall further after the Federal Reserve indicated last month that it would cut its benchmark rate later this month.

"They want to lock into a lower interest rate," Tony Baroni, CEO of the Tony Baroni Team for Keller Williams, said.

At the same time, condo owners — as well as homeowners — are facing higher insurance costs, a deterrent for some would-be buyers. Insurance costs have spiked in recent years after major insurers stopped offering policies in the state, citing escalating claims from worsening natural disasters.

Hurricane Ian in 2022 only exacerbated the problem after it caused $112.9 billion in damage — mostly in Florida — making it the third-costliest storm in the US.

"It's decreased — substantially — affordability" for homebuyers, Baroni said.

'Excessive assessments'

The third whammy, though, hits condos only. Following the deadly collapse of a condominium in Surfside, Fla., in 2021, state lawmakers toughened up rules regulating condo buildings.

Condominiums that are at least three stories high must undergo an inspection after 30 years and then every 10 years after that. Buildings older than 30 years must complete those inspections by the end of this year. Other regulations stipulate how often condo associations must review their reserve funds and how much must be placed in reserve based on the inspection's findings.

That means some potential condo owners are getting saddled with higher monthly condo fees or one-time assessments after their building's inspection turned up required maintenance or repairs.

"Condo fees are rising $500 or more each month or there's a one-time cutting of a check up to $10,000," Yun said. "Many retirees who don't have access to funds are forced to list their properties to get out of it."

That's added to the inventory of condos on the market. The number of active condo listings in July was almost double a year ago, rising 91.1%, according to the Florida Realtors.

The extra supply is pressuring pricing, and any listing in a condo building that needs any major repairs would get hit even more.

"Those buildings where we have excessive assessments, it certainly affects price," said Ron Shuffield, CEO of Berkshire Hathaway HomeServices EWM Realty in Southeast Florida. "A buyer has to allocate a certain amount a month for work. Only way to balance that is in the price."

"It's definitely going to be something more common."

'The biggest factor'

Of course, the regulations only pertain to older buildings, Shuffield pointed out, noting that pricing on newer buildings and those in development may not be affected as much. That could help buoy the rest of the condo market from a price crash as long as demand remains strong.

Yun believes it will because job growth in the stat e has outpaced the national average for some time, luring new residents to the Sunshine State . And as mortgage rates ease, buyers will be more willing to jump back into the market, further shoring up demand.

The other key difference between this condo pullback and the dramatic one during the Great Recession so far is equity.

While condo prices are down, they are well above where they were just four years ago. The median sales price was $315,000 in July, up 50% from $210,000 in July 2020, per the Florida Realtors. Only 1.1% of Florida homeowners owe more than their home is worth.

That means if costs become an issue, condo owners have many choices. They can tap their equity to pay for a one-time assessment. If they bought when mortgage rates were higher, they can refinance as they drop. At worst, they can sell and still pocket some money.

There won't be nearly as many distressed sales flooding the market. There were only 47 condo foreclosures and three short sales in all of Florida in July.

"To me, that's the biggest factor," Baroni said. "People's homes are worth a lot more than what they paid and that gives them a lot of options no matter what."

@JannaHerron .