Condo sales: bumping along the bottom?
Unlike the SFH market, sales of condos remain well below the levels of the early years of this century, as the following table shows:
©Oliver Reports
In common with the SFH market, however, sales also remain well below levels of the late 1990s, as shown here:
©Oliver Reports
Note that in the 12 years from 1994 to 2005, sales averaged 70 each year and dropped below 60 only twice. Since 2006 sales have reached 50 only once and have averaged just 43, which is about where 2012 will end up.
Why the difference between trends in condo sales and SFH sales, which have returned to the levels of the early 2000s?
Nationally, the condo market bore the brunt of the sub-prime fiasco and the subsequent wave of foreclosures. There was a dramatic reduction in mortgage availability and a severe tightening in terms. This had a knock-on effect on the local market, with buyers in small condo buildings in particular having difficulty in getting financing.
The drop in prices of SFHs also made the lower end of this market more competitive with condos and much easier to finance.
Other local factors are:
1. The condo market here is much smaller than that for SFHs. Overall in Marblehead there are roughly 1,000 condos and more than 6,000 SFHs.
2. Since the beginning of 2009 some 720 SFHs have sold as against 152 condos.
3. Foreclosures (FC) and short sales (SS) have been more of a factor: 13% of condo sales since 2009, but fewer than 5% of SFH sales.
4. 13 of the 19 FC/SS sales since 2009 have occurred in buildings with 4 or fewer units, and 18 of the 19 took place at prices below $300,000.
Condo financing has eased since the darkest days and sales seem to have bottomed. It is hard, however, to see the appetite returning for the type of condo conversions of apartment buildings seen in the past, where often very little was done to improve an old building. The recent development of 82-84 Front Street, which was basically rebuilt into high quality condos by a professional developer, may well indicate the sort of development that is needed to attract condo buyers today.
Matt is, of course, dead on target. That said, it would be interesting to see whether there is any greater tolerance for poor flow, tucked in kitchens and the rest when it comes to the sale of condos in the old part of town. SFH owners clearly put up with such conditions in order to live in a special environment in a historic building. Or maybe not so much anymore?
Do you know whether antique SFHs with difficult stairways and limited parking have suffered a similar drop in value and turnover?
Wow – condo sales are not very healthy eh?
Although looking at your numbers I am thinking that this is the rate at which they should be selling. If there are 6 SFH to every condo you would think SFH sales would be roughly 6 times the number of condo sales. Since the beginning of 2009 there have been 152 condo sales. With more than 6 times the number of SFH the sale rate for SFH should be more than 900 rather than the 720 that have sold. Of course condo owners are more transient and therefore the rate of condo sales per number of condos should be higher, which they are.
The higher rate of condo sales in the past was greatly increased by the fact that many of these condo sales were new condos. Just converted multi-family homes versus resales.
Matt – couldn’t agree more. In a later article I shall explore the difference in pricing between the older type of conversions you describe so well and modern, well designed and well constructed condos. As often, lumping them all together provides an inaccurate picture of what is really happening.
In the market, we are seeing the shift to high quality condo developments. Today’s condo buyer doesn’t want the awkward layouts of yesterday. Sticking appliances in a closet or separating the kitchen into two rooms won’t cut it anymore. Buyers want thoughtfully designed units not just “granite and stainless.” A developer must now incorporate flow, layout, and natural light where a simple paint and appliance package used to be acceptable to buyers.
Today’s buyer is also looking for period detail combined with modern living. The end product, when done properly, will often get multiple offers and sell quickly.