Condo
Resale Rates Pass Houses
Written By: By Kenneth R. Harney, Washington Post
8-30-03
Call it the Cinderella segment of the
American home real estate market: Condominium apartments and
townhouses are now officially the hottest form of housing,
appreciating in value at more than double the rate of detached
single-family resale houses.
New national survey data show that the
median price of a resale condominium in the second quarter was up
15.1 percent from the same period of 2002. The median price of
detached single-family houses nationwide, by contrast, rose 7.4
percent.
Equally significant, the gap in overall
pricing between condos and traditional homes is now almost
negligible. The median-priced resale home in the national survey was
$168,900. Condos, once marketed as the lower-cost, lower-maintenance
alternative to detached homes, sold for just $5,400 less, a median
$163,500.
S. Lawrence Yun, senior economist at the
National Association of Realtors, the group that conducted the
pricing study, said in an interview that the "condominium
market historically had lagged behind" the detached
single-family market in appreciation rates and sales. But now demand
for condos, and all their amenities and efficiencies, "has been
rising very sharply," both at the luxury end of the spectrum
and at the entry-level, low-cost end.
The lower-priced segment "is super
hot," said Yun, with condos now a major entry point into
homeownership for first-time buyers. On a regional basis, the
appreciation performance of condos has been most impressive along
portions of the two coasts: In the Western states, prices of resale
condos soared 22.8 percent year-over-year, to a record median price
of $211,300. In the Northeast, condo resale prices hit a median of
$177,600, up 21.6 percent from the second quarter of last year.
In the South, the median resale condo went
for $131,500, a 17.2 percent annual increase. In the Midwest, the
median condo gained 6.3 percent, to $158,900. It was the only region
where condominiums appreciated at a rate below the national average
for single-family detached homes.
Overall, national sales of condos hit a
record high in the survey: a seasonally adjusted annual rate of
861,000 units. The previous record sales rate was 829,000 in the
fourth quarter of 2002.
What's behind the relatively sudden
transformation of condos into the premier profit-producers in real
estate? Part of the answer, Yun said, is demographics. In almost
every metropolitan U.S. market, baby boomers are looking at empty,
or soon to be empty, nests. The children are finishing college or
starting first jobs, and the family home is beginning to look too
big.
No-maintenance, high-amenity luxury
condominiums offer a reasonable way to downsize and simplify life
for many of these homeowners. Condominium communities often come
with superior facilities compared with detached houses in
traditional neighborhoods, such as exercise rooms, pools, tennis
courts and no lawns to mow or gardens to weed.
Resales at this end of the market are
squeezing away the historically large differentials in median prices
between detached houses and condos. But it is the sizzle and fire at
the lower-priced end of the market that is helping stoke demand
throughout the condo pricing continuum.
"You have a very large pool of buyers
who have been brought into the market by low mortgage interest
rates," Yun said. They are newlyweds, middle-income renters who
find that with rates around 6 percent they can now afford to own a
home for the first time.
Yun said "the condo market is in a
better position to capture these buyers" than the detached-home
segment because it offers greater numbers of lower-priced resale
units with smaller square footage.
The big equity gains available from condos
may have also caught the eye of still another type of purchaser --
small-scale real estate investors. Although Yun's latest survey did
not examine investor purchases as a contributing factor to the
national 15.1 percent appreciation rate, earlier survey data on
second-home purchases suggest this might be the case.
Polling data from recent second-home buyers
interviewed this past spring by the National Association of Realtors
confirmed that a rapidly rising percentage of buyers are motivated
by "investment gains" rather than more traditional
recreation or personal use. The study found many second-home buyers
fed up with poor investment returns in the stock market and
impressed by high appreciation rates in residential real estate.
Whatever the cause, here's the bottom line:
Condos are now the documented profit leaders in housing this year,
yielding more than twice the percentage gains of detached houses.
And you can take that statistic all the way to the bank.
Kenneth R. Harney's e-mail address is kharney@winstarmail.com.
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