For 2015, development of condominiums in certain markets is expected to become a popular trend as rent for apartments increase and lending terms loosen. The spring home buying season is just around the corner and based on dynamics of supply and demand, experts anticipate a surge of condominium purchases.
According to recent statistics, the number of homebuyers is expected to be greater in 2015 compared to last year. In 2014, sales of existing condominiums dropped 2 percent from 2013, primarily because of a reduction of supply inventory that fell to 4.5 months by year-end. However, by January, inventory dropped an additional 2 percent. When there is a supply of six months, a stable market is usually indicated.
As reported by the National Association of Realtors (NAR), last year, the median condominium price in the US was $204,300, a slight 5 percent increase from 2014 but up 17.6 percent from 2012. Without being seasonally adjusted, the price of condominiums in January was up 5.3 percent compared to 2014.
However, because interest rates are still low, not only are home mortgages more accessible, the mediocre number of condominium sales should increase during the spring. To help buyers who have struggled saving for a down payment, especially first-time buyers, a number of lenders are considering lowering requirements.
As stated by Luis Mejia, director of US research, multifamily with the CoStar Group, a first option for many first-time buyers is condominiums. During periods of economic recovery, attached type homes become more popular.
Through 2015, a reducing backlog of available condominiums coupled with a rise in jobs within the US market will prompt more buying. This trend is expected to enter new submarkets of larger metropolitan cities, as well as certain second-tier markets just getting started with condominium development.
Demand and supply of condominiums is concentrated primarily within larger metropolitan areas. In the near future, even as age and lifestyle of households change, demand for condominiums will remain more dominant over single family homes in centrally located urban areas opposed to the suburbs.
Overall, there will be significant infill of opportunities for condominiums this year. Because of this, markets where attached living has not yet taken off should be seriously considered by investors. In fact, the number of foreign investors, REITs, and capital coming from private equity is moving back into the market of condominium development.
For instance, there were 421 luxury condominiums as part of the Toll Brothers City Living collection this past January. These units were either open or scheduled to be open soon within primary US urban areas. In addition, 1,474 units were going through entitlement and expansions are being considered for markets in San Francisco, Boston, and Miami with more presence anticipated in New York City.
Some markets still have a low supply of condominiums to include places like San Francisco California where land is limited. There, supply is just 2.5 months while in Los Angeles, only 3 months. In 2013, condominiums experienced a solid rebound but last year, there was a decline of sales that coincided with a slow overall housing market. Now, buyers, as well as investors are seeing a shift.