Condo sales have been on a roller coaster ride in recent years, as the recession hit the sector hard. But is the country ready for a condo revival?
In 2005, condo sales surged to 12.7 percent of all home sales. But the financial crisis caused the condo market to recede — even more so than the single-family market — with sales falling to 10.7 percent of all home purchases in 2009.
“Condo sales moved sideways several years after the recession before picking up steam again in 2013,” CoreLogic Deputy Chief Economist Sam Khater writes on the company’s blog. “This year, it continues to rebound and currently accounts for 12.3 percent of all sales in 2014.”
The national condo market is in recovery mode, Khater says, but the sector is recovering at different speeds among metro areas. Denver is leading the pack in condo sales, where they are 16.9 percent higher than year-ago levels, followed by Houston, at 15.5 percent, and Naples, Fla., at 10.8 percent. However, the weakest performing condo market is Las Vegas, where sales dropped 16.5 percent from a year earlier.
As of June 2013, 22 of the 25 top condo markets reported rises in sales compared to prior years. But interest-rate rises in the second half of 2013 caused sales to cool off somewhat, similar to what occurred in the overall market. By June 2014, only 14 of those same markets were showing increases year-over-year, CoreLogic reports.
Housing analysts are optimistic the condo market is poised for a big rebound, particularly since the largest cohort in the U.S. is the 20-to-24 age group.
“This specific age cohort might currently be driving today’s rental market, but they will likely be driving the first-time home buyer and condo markets over the next five to 10 years, driving demand for newly built condos,” Khater notes. “That demand is heavily needed in the market now, given that newly built condos were hit harder in the last housing downturn than newly constructed homes overall.”
New condo production is only at about 10 percent of the pace it was during the late 1970s and early 1980s, when baby boomers were in their early 20s (and at about the same size as the current group of 20-to-24-year-olds), Khater notes.
“Therefore, the lack of new condo production, in conjunction with large demographic demand on the horizon, provides the market with a large opportunity to expand new condo sales over the next decade,” Khater writes.
Source: Realtor.com
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