In Midtown's Slower Condo Market, The Building Matters As Much As The Unit

Since August 3, 2026, a conventional loan for a condo in a building of more than ten units can't use the quick review lenders once relied on. Fannie Mae retired its Limited Review process for every loan application dated on or after that day. A lender now has two options: put the condominium project through Full Review or qualify it for a waiver. In Midtown, townhome and condo listings have nearly doubled since January. That makes the review a big part of whether a sale closes and how quickly.

So a buyer who lines up two Midtown units with matching square footage, finishes, and asking prices is still missing half the comparison. The other half is the association's budget, its reserves, its insurance, and whether a lender will sign off on all three.

The review that changed on August 3

Lender Letter LL-2026-03 came out on March 18, 2026, and it rewrote how Fannie Mae evaluates condo projects. Under Full Review, the lender looks at the whole project, not only the unit and the borrower. Freddie Mac made matching changes the same day in Bulletin 2026-C, which retired its Streamlined Review for applications received on or after August 3, 2026. Fannie Mae added most of the new policies to its Selling Guide on August 5, holding the new reserve standard back until after January 4, 2027.

Fannie Mae's letter was blunt about why. It pointed to a link between condo projects with underfunded reserves and projects that need critical repairs. It also said unit owners in those buildings "can experience substantial financial hardship from unexpected special assessments or higher regular assessments or dues." The policy is built to screen for exactly that risk.

Two of the letter's changes loosen the rules for particular kinds of buildings.

• Small projects with ten or fewer units can now qualify for a Waiver of Project Review. If the project has five to ten units, it can't be part of a master association or a larger development.
• Investor-heavy established buildings no longer face the 50% investment-property concentration limit on investor loans under Full Review. New or newly converted projects still need at least half their units sold or under contract to owner-occupants or second-home buyers.

Midtown has buildings at both ends of that spectrum, so the same rulebook can make one building easier to finance and another one harder.

What Midtown's numbers say about which units move

HAR's market-area figures for Midtown put townhomes and condos in one category, so the numbers below mix the two.

Two things stand out. First, the eight units that sold in September 2026 went in a median of 26 days, about half as long as the listings still waiting. Second, they sold for a median of $343,000, more than $26,000 below the median asking price of what was left on the market. Buyers are acting quickly on units they see as priced right and financeable, and the rest are piling up. Divide September's 78 active listings by its 8 sales and you get close to ten months of supply at that pace. Eight sales is a small sample, so read that figure as a direction, not a forecast.

The longer view shows how thin the market has become. In 2026, HAR's Midtown table shows between four and ten townhome/condo sales in each month it reports, and some months don't appear at all. In April 2022 the same table shows 27 sales, and May 2022 shows 24.

The rest of Houston looks similar. HAR's September 2026 market update reported 323 townhome/condo sales across the region, down 21.0% from a year earlier. The median price fell 9.1% to $209,000, and inventory rose from 8.0 to 9.3 months. Pending sales dropped from 440 to 370. Borrowing got more expensive at the same time. Freddie Mac's 30-year rate averaged 6.86% in September and reached 7.40% in the second week of October.

With fewer buyers and more financing friction, anything that can slow or stop a loan has a bigger effect on price. A building that passes review easily lets a seller accept any financed offer. A building that struggles may limit the seller to cash buyers, and fewer buyers usually means more negotiating room for whoever is left.

The January date most listings haven't priced in

The provision with the most impact on Midtown pricing hasn't taken effect yet. For Full Review applications dated on or after January 4, 2027, Fannie Mae raises the minimum share of the association's annual budgeted assessment income that must go to replacement reserves from 10% to 15%. Freddie Mac set the same 15% floor for applications received on or after that date. Fannie Mae's October 7 Selling Guide update didn't change condo project standards, so the January date still stands.

That creates a gap. An association that budgets 12% for reserves meets the standard this fall but falls short for a buyer whose application is dated January 4 or later. A buyer who goes under contract in early November and applies right away is working under the current rule. A buyer who closes this year and resells in a few years will be selling under the new one. A building's budget can be fine for this sale and become a problem at the next one.

An association can close a reserve gap in two ways: raise regular dues or levy a special assessment. Fannie Mae's letter names both as the costs that hit owners when reserves run short.

Where a building's finances show up on paper

Texas law gives condo buyers a document that answers most of these questions. Under Texas Property Code §82.157, a condo seller has to provide the declaration, bylaws, rules, and a current resale certificate. The association must produce the certificate within 10 days of a written request and can charge up to $375 for it. The Texas Real Estate Commission's Condominium Resale Certificate form 32-5 has been in effect since November 25, 2024, and the association fills it out and signs it.

Read it in the same order a lender reviewing the project would:

1. Periodic assessments. The current dues.
2. Unpaid special assessments. Money owed that a new owner could inherit.
3. Approved upcoming capital spending. Projects the board has already voted to fund.
4. Reserves. Compare the reserve figures with the budget and balance sheet to see how close the building sits to the 15% line coming in January.
5. Insurance. Coverage that Fannie Mae's condo materials list among the issues that can make a project ineligible.
6. Lawsuits. Significant litigation is another item on Fannie Mae's eligibility list.
7. Transfer fees. A closing cost that sits on top of the price.

Midtown townhomes that sit in a regular subdivision HOA instead of a condominium regime fall under Chapter 207 of the Property Code. That chapter requires a resale certificate within 10 business days covering assessments, reserves, budget, insurance, and transfer fees. HAR's figures lump the two property types together, but the paperwork and the lender review differ, and that's one reason a Midtown townhome and a Midtown condo at the same price can behave very differently once they're under contract.

The Houston Chronicle's September 2026 report on Bayfront Towers in Nassau Bay, well outside Midtown, shows what happens when reserves run out. The association raised more than $2.8 million through three special assessments during its post-fire rebuild, which its treasurer put at $38,249 per unit. Houston-area HOA and property-management professionals quoted in that story said association insurance premiums have skyrocketed and forced some associations to raise monthly fees.

FAQ

Does a clean result on Fannie Mae's condo lookup mean a building is approved? No. Fannie Mae's Condo Project Status Finder states that a "no findings" result is not a project review or an approval. The lender still has to do the review.

Is FHA financing an option for a Midtown condo? According to HUD, only if the building is an FHA-approved project or the unit qualifies for Single-Unit Approval. Single-Unit Approval still requires a project of at least five units and checks FHA concentration, owner occupancy, and the project's finances.

Does short-term rental activity in a building matter? It can. Fannie Mae lists hotel-like operations and daily or short-term rentals among the characteristics that can make a project ineligible. A loan on a unit in an ineligible project can't be sold to Fannie Mae.

This post is general information, not legal, tax, or financial advice. Confirm the details of any specific loan, building, or contract with your lender, attorney, or other qualified professional.

If you're weighing a Midtown condo or townhome this fall, Nicole Brende can help you get the resale certificate early, compare a building's reserves with the January 2027 standard, and coordinate with your lender on project review before you commit to a price. Let's connect. Schedule a consultation or request a custom market analysis.