Anxiety complex?
THE shift in the real estate market has raised that age-old question: If prices crash, will condos slip and fall before single-family homes, and will they stay in the gutter longer?
First, here's where we are: Buyers seeking condos have scads to choose from, but if it's bargains they want, they should probably hang tight a bit longer.
Things are by no means cheap these days, even in the condo universe. The Los Angeles/Long Beach/Santa Ana metropolitan area was the second-most-expensive condo market nationwide in the second quarter of 2006, according to the National Assn. of Realtors, behind the San Francisco Bay Area and ahead of San Diego.
It's unclear how long these high prices will last, but appreciation rates already have slowed dramatically. The median price for a condominium in Southern California in July was $404,000, up 2% from $396,000 a year ago, according to DataQuick Information Services, a real estate research firm. The year before, condos appreciated 16.8%.
They're still much less expensive than single-family homes, which appreciated 4.6% to $520,000 in July from a year ago. And the reality is, choosing to live in a condo instead of a single-family home is frequently more about means than lifestyle.
So how will condos fare in the months ahead?
If history is a guide, condo and single-family-home prices will "dance to the same tune," said John Karevoll, chief analyst for DataQuick, meaning that the two types of housing will adjust together.
Condos and single-family homes have historically declined in tandem the first 5% to 7% of a market slide. Condo prices then tend to drop slightly more.
Industry watchers are keeping a close eye on the condominium market because of its important role in keeping the housing mix balanced. In the early 1990s, condo prices, like the rest of the market, dropped like a stone as the housing boom went bust. Builders were stuck with a huge supply of unsold condos, further eroding prices. First-time buyers were able to leap-frog over that housing type and buy cheap single-family homes, Karevoll said. By 1996, as the market regained steam, condos once again became the most-affordable housing for entry-level buyers, freeing up single-family homes for move-up buyers.
Today, condos are popular with first-time buyers and young professionals who prefer to live in an urban setting and pay less. At the other end of the price spectrum, wealthy older buyers with equity to burn are creating a whole new market for high-end condos, as that demographic begins to downsize.
