Condominium sales are hot in the cold states and cooling off in the Sun Belt.
That is the newest manifestation of the traditional and cyclical hot-and-cold nature of real estate.
Locally, depending upon the area involved, there is an ample supply of such units for sale--and lease--and the adage of location, location, location is never more believable than in slow times.
Nationally, an oversupply of condominiums last year reached a decade-high total of 270,000, representing 22% of all housing for sale.
The principal factors for the slowing appear to be overpricing and the disappearing investor market. Buyers of condominiums for investment and leasing have decreased greatly.
One local realtor said her usually active market tailed off during the first quarter. A reason is that sellers are unrealistic about the price tag they put on their units--not an unusual characteristic, salespersons will tell you.
Another active local realtor cited out-of-line prices as a deterrent to sales but added that when prices are reduced--to a realistic number--sales pick up. He said buyers have become sophisticated enough to be wary of buying units in condominium projects that have the look of a "glorified apartment house." And, there is nothing more desirable for many buyers, he added, than knowing that their condo has 24-hour security. That is a major sales tool.
An intangible factor here is the tremendous and continuing desire by first-time buyers for a home of their own. When condos were the only items in their affordability range, that's what they bought; now, with builders building smaller homes and with prices to match, first-time buyers have a new choice.
These first-time buyers, who had bought even more units than the investors, have changed their taste in housing choices apparently, adding to the drop in sales, particularly in the southern and western states where an ample supply exists, a detailed report on 23 market areas shows.
Most of the softness in the market, according to the U .S. Housing Market study published by Lomas & Nettleton, the country's largest mortgage banker, involves garden apartment-type projects. Town house condominiums are "hardly hurting at all," the report says.
In the Northern and Midwestern states, the market is steady and still expanding. In fact, the New York and Boston areas are described as hot-selling areas for all new, resale or conversion condominiums.
An assessment of the Southland picture is provided by David L. Parry, executive director of the Real Estate Research Council of Southern California, at Cal Poly Pomona.
"In general, the number of unsold units of attached housing (condominiums) on the market increased in Los Angeles County by substantially more than detached (single-family) housing. Of the units under construction at year-end 1984, about 60% were attached units whereas of those units completed and unsold, nearly 80% were attached. So the county as a whole does not have an encouraging picture for attractive housing."
The largest unsold inventory stretches from Palos Verdes to Malibu, with the heaviest concentration in the county being in the West Los Angeles area.
"In January, there were 1,099 unsold units in the county . . . and 633 just in West Los Angeles, and conversations I've had with developers seem to verify that the traditional detached home is selling much better. That's what generally happens in real estate recoveries--people move to the traditional rather than toward the less expensive," Parry said. The housing market study shows that conversions of apartments to condominiums in the Los Angeles-Orange counties market numbered about 10,000 in 1979, rose to 12,500 in 1980, and then gradually fell to 2,000 units last year. This year only 800 units are expected to be changed over.
Many condominiums are being leased with options to buy, but that approach makes up a comparatively small part of the market. More commonly, unsold units are turned into rentals, usually to the dismay of owner-occupants of units within the condominium project.
The report shows that there are 6,500 units in inventory in the Los Angeles-Orange counties market and 10,000 throughout Southern California. It adds, bluntly, that "resales are very flat, multilist inventory in 2-year range, appreciation zero."