Biltmore Condo Prices Are Softening. For Financed Buyers, January 4 May Matter More.

Take a financed buyer who goes under contract on a Biltmore-area condo in mid-December, with the lender opening the loan application the first week of January. That buyer may face a different eligibility test than a buyer who applied on the same unit a few weeks earlier. For conventional loan applications dated on or after January 4, 2027, Fannie Mae and Freddie Mac will require a condo association's budget to put at least 15% of its annual assessment income toward replacement reserves. The current minimum is 10%.

January 4 is about ten weeks out, and it lands in the middle of the season when Biltmore condo buyers are active. In a submarket where condo listings were already piling up this fall, whether the HOA's budget clears the new reserve test can decide more transactions than the next price reduction does.

A Softer Market Where Financing Decides the Deal

The September 2026 numbers for ZIP 85016, from the Phoenix REALTORS® Local Market Update, show the condo segment carrying far more supply than single-family homes in the same ZIP.

Supply of 7.4 months means that if no new condos were listed, today's inventory would take more than seven months to sell. That favors buyers on paper. Condo sellers still got 97.1% of list price in September, a slightly higher share than single-family sellers got. That suggests the units selling are priced close to what buyers will pay, and the rest wait. The report also says its price figures do not account for seller concessions, so the actual net price on some of those sales was likely lower.

In a market this slow, a deal that falls through because the loan can't be approved costs the seller months, not days. The January 4 change raises that risk at exactly the point where Biltmore's condo segment is least able to absorb it.

What the 15% Actually Measures

The new rule is easy to misread as a requirement that every owner's dues go 15% into savings. It isn't. Fannie Mae's Selling Guide measures the reserve figure as a ratio from the association's budget: the annual budgeted allocation to replacement reserves, divided by annual budgeted assessment income. Special-assessment income is left out of the bottom number.

Both agencies announced the change on March 18, 2026. Fannie Mae's Lender Letter LL-2026-03 applies the 15% minimum to loans reviewed under its Full Review process. Freddie Mac's Bulletin 2026-C uses the same percentage and keys it to the date the lender received the application.

Freddie's bulletin includes a reminder that matters for any building with a recent approval on file:

"If a Seller has an unexpired project review completed prior to the effective dates listed above, the Seller must still confirm that the project complies with these new Guide requirements for applications received on or after the effective date of such requirements."

A building that cleared review in November does not automatically clear it again in January. The rule checks the budget again for every application dated after the cutoff.

The Simpler Review Options Are Already Gone

Many established buildings used to go through lighter reviews. Fannie Mae retired its Limited Review process for applications dated on or after August 3, 2026. Established projects that used to qualify for it now go through Full Review or, where they're eligible, a waiver. Freddie Mac retired its Streamlined Review on the same date.

Since August, buildings that once went through a lighter review have been moved to Full Review, and starting January 4 that same review raises the reserve minimum to 15%.

An association that budgets below the standard percentage can still qualify with a reserve study, but the rules for that tightened in August as well. The budget has to include the study's highest recommended reserve contribution. "Baseline funding," a method that lets the reserve balance drift down toward zero without going below it, no longer counts.

Where the Test Doesn't Apply, and What Still Can Stop a Loan

Smaller properties often get a different review. Fannie Mae's Waiver of Project Review is still available for detached units, for 2- to 4-unit projects, and for 5- to 10-unit projects that are not part of a larger development or master association. Freddie Mac has a similar Exempt From Review path covering detached units and qualifying 2- to 10-unit projects.

Some problems block a loan no matter which review path applies:

• "Unavailable" status. Fannie Mae will not buy loans on units in a project marked Unavailable in its Condo Project Manager system, whatever the review method. Lenders look up a building by name or address in that system.
• Unfinished critical repairs. Under Fannie Mae's guide, a project is ineligible if a special assessment is tied to a critical repair that hasn't been fixed. The guide defines critical repairs to include conditions that materially affect safety, structural integrity, habitability, financial viability or marketability.
• Delinquency. Under Full Review, no more than 15% of units can be 60 or more days behind on regular assessments. The same cap applies separately to each special assessment.

Lower Prices, Higher Monthly Costs

The price drop is real, but it's only part of what an owner pays each month. The Arizona Republic reported on October 18 that the metro Phoenix median condo price had fallen to $315,000 by mid-October, its lowest since 2021, citing The Cromford Report. Over the same period, the median monthly HOA fee had risen about 40% since 2020. The paper put the current metro median HOA fee at $374 a month, citing Cromford, with luxury buildings above $2,000. Freddie Mac's Primary Mortgage Market Survey put the 30-year fixed rate at 7.40% for the week of October 15, 2026.

In the same Republic report, Tina Tamboer, senior housing analyst at The Cromford Report, called the Valley condo market "frigid." She described how her own condo fees rose from $300 to $500 a month after her association got an unexpected $15,000 water bill it didn't have the reserves to cover. The paper also said the higher reserve requirement could push dues up for owners.

This connects back to January 4. A building that raises its reserve allocation to meet the new minimum may keep its buyers' loans eligible while making each unit more expensive to own. A building that doesn't raise it keeps dues lower but risks losing conventional financing. Either way, comparing two Biltmore condos on asking price alone leaves out a big part of the cost.

Questions to Ask Before the Application Is Dated

The questions are much the same whether you're buying or selling. What changes is how much time is left before January 4.

1. What share of the current budget goes to replacement reserves? Divide the reserve line by total budgeted assessment income. A building near 10% will feel the January change; one already at 15% or above won't.
2. Is there a current reserve study, and does the budget include its highest recommended contribution? If the budget relies on a study instead of the percentage, this is the test it has to meet.
3. Are any special assessments planned or underway, and what are they paying for? Lenders ask the same question. A special assessment tied to an unfinished critical repair can make the whole project ineligible.
4. How many units fit the waiver or exempt categories? Detached units and small projects that stand on their own get reviewed differently from a tower.
5. When will the loan application be dated? For a contract signed in December, this may be the most important date in the timeline.

This is general information, not legal or financial advice. A lender can confirm how a specific building and loan will be reviewed, and an attorney or tax professional can address your own situation.

A Few Straight Answers

Does the rule apply to cash buyers? The reserve requirement is a condition Fannie Mae and Freddie Mac set for buying a loan, so it applies to financed purchases they would back. It also affects a seller's pool of possible buyers, since fewer buyers can get financing in a building that fails the test.

Will under-reserved buildings get higher interest rates? The agencies' published rules describe eligibility, not a pricing surcharge. If a project fails the review, its units' loans can't be sold to the agency.

Does the old 10% rule apply until January? Fannie Mae's Selling Guide dated October 7, 2026 still lists 10% as the Full Review baseline. The 15% minimum starts with applications dated January 4, 2027 or later.

If you're planning to buy or list a Biltmore-area condo this winter, the HOA budget and the January 4 date should go into your plan before price does. Josh Gonzalez can help you read a building's budget, plan when the loan application is dated, and prepare for the questions a lender will ask. Let's Connect.