Follow the condos

Posted by: Chris Palmeri on April 6, 2006

la condo.jpg

When Doug Duncan, chief economist of the Mortgage Bankers Association, wants to get a forward peek at housing prices he looks at condos. “A higher share of them are discretionary purchases,” Duncan notes. “They’re second homes and investor properties.” That means owners don’t need to buy them or need to keep them like they do primary residences. Duncan says he started noticing a slowdown in condo price appreciation last summer. The market really turned in October and November. Condo sales fell 1.5% to 850,000 units in February. The median price was $214,300, up 3.5% from February 2005. Single-family home sales, by comparison, were off just 0.2% from their 6 million-unit pace of February 2005. The median home price was $208,500, up a still-strong 11.6% from a year ago. Duncan isn’t forecasting any kind of market collapse, just a “return to normalcy” which he says means price appreciation averaging 6% a year for homes. That appreciation might be less though for units in the Los Angeles building in the picture. A two-bedroom, two-bath condo there is selling for $890,000.

Reader Comments

David Porter

April 7, 2006 3:36 PM

Chris,

I have always liked to do opposite of what "the herd" is doing. We bought our Scottsdale condo 4 years ago when Scottsdale was cheap.

Now that many second home condo areas are overbuilt and the herd has left, I believe that in the next year or so we will see LOTS of opportunity to buy nice stuff in nice places.

I am keeping my eye on Hawaii which was WAAAAAY over run!

Just watch....when the units that speculators bought are completed...they will be running for the doors. I will be there with a smile and my check book.

Glenn Kelman

January 11, 2007 6:23 PM

It's also easier to compare prices of condos because, as SocketSite's Adam Koval likes to point out, two units in the same building selling at different prices are the most precise reflection there is of what's happening in a market.

Wes

June 18, 2007 10:23 PM

David,

Let us know how it works out to catch a falling knife.

Condos were the 2006 equivalent of a 1999 SUV. Nothing more than a fad. I expect some of the newer models around here to never sell and soon become section 8 housing, to blow away in the next hurricane because of shoddy construction.

The only person I've found harder to deal with the facts than a sraight from McDonalds counter mortgage broker is a newly, proud condo owner. Not to sound crass, but I laugh when people tell me they pay $1,600 around here a month for the priveledge of owning a former apartment that rented for $850/mo back in 2004.

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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