Signs of a Condo Comeback Across the Country
June 12, 2014
New condo towers are popping up in metros across the country, from New York to Los Angeles, as developers are betting on the return of the "riskiest type of residential real estate," Bloomberg reports.
A 41-story tower in Seattle is in the first phase of the largest condo development ever in the city. In Los Angeles, construction will start later this year on a 22-floor building, the city's first downtown high-rise condo project since 2005.
"Condos are regaining favor after a surge in rental demand pushed the U.S. apartment-vacancy rate to the lowest level in a decade, sending urban rents soaring, while the inventory of for-sale housing remains historically low," Bloomberg reports.
"We're in the very early stages of a long recovery in condos," says Sam Khater, deputy chief economist for CoreLogic. "Now you're seeing rental booming, but today's renters are going to be tomorrow's condo buyers."
During the housing crisis, condo builders faced particular hardship as buyers canceled purchases once home prices began to fall. With condos, developers make a gamble by spending money to build the projects before deals are completed, which can make condos one of the riskiest forms of residential property, says real estate consultant John Burns.
About three years ago, high-end construction projects started to increase in places such as New York City, San Francisco, and Miami, driven largely by wealthy, international buyers who were willing to pay cash. But smaller markets are now ramping up condo business, particularly as inventory shrinks and lenders are becoming more optimistic about the housing recovery, Bloomberg reports.
Condo prices rose 8.3 percent in April compared to year-ago levels, reaching a median of $205,500 nationwide, according to the National Association of REALTORS®. Meanwhile, single-family homes saw a price gain of 4.7 percent in that time to $201,100.
Condo buyers tend to be willing to pay a premium in order to be able to live in high-density, high-cost areas, National Association of Home Builders chief economist David Crowe told Bloomberg.
"There's a lot of pent-up demand from first-time home buyers, and condos are a good first stop," Crowe says. "Dense developments like condos give the lifestyle they're looking for."
Source: “Condos Make a Comeback as Towers Rise From Boston to LA,” Bloomberg News (June 11, 2014)
Updated: November 25, 2020