Photograph by Kathy De La Torre
Empty-nesters, dot-commers, relocator and first-time buyers are increasingly turning to condos and townhouses for their low maintenance and more reasonable price.
Buyers are turning to condos, townhomes
By Sue DeRosier
As the price of the average single-family home rose above $500,000 during the latter half of 2000, many buyers decided to stake their claim in condominiums and townhomes as a means of entering the real estate market. The 2000 California Housing Finance Survey, released in early December, reported that the median time on the market and the price discount (the percentage difference between the initial asking prices and the final sales price) were at record low levels for condominiums during the third quarter of the year.
In addition to California's Housing survey, the National Association of Realtors (NAR) released the third quarter market results for condominium and townhome sales, which showed record sales of 728,000 units nationwide, up 7.2 percent from the second quarter.
The Santa Clara County market, according to the Silicon Valley Real Estate Report, has seen the median price of a condominium rise to $351,000 in November 2000, an increase of almost 10 percent in two months.
"The condo market typically lags one year behind the single-family home market, meaning, when sales start to slump or level off for single-family homes, condos and townhomes are just beginning their best sales cycles," said Gino Blefari, president of Century 21, Seville-Contempo.
This phenomenon was widely felt in 1989-1990, when single-family home sales dropped significantly but condos had their best year ever, added Blefari.
NAR President Dennis R. Cronk said affordability and lifestyle factors are driving the condo market. "In high-cost housing markets, condos often are the only option for first-time buyers. At the same time, empty-nesters are continuing to seek the simpler lifestyles offered by condos and co-ops," he said.
In addition to being a lifestyle choice, NAR chief economist Dr. David Lereah says the condo/townhome market is being pushed by a combination of factors. "Interest rates have been edging down, which is an obvious stimulant, but when you look at the pressure on single-family home prices in many markets, the lower priced condos become even more attractive to people who are more flexible in their housing choices," he said.
The average rate on a 30-year mortgage has fallen to just below 7 percent, and there is speculation that the Fed will drop the rate further if the economy continues its downward spiral.
In the Bay Area, local Realtors point to four primary types of buyers who opt for condos and townhomes rather than detached, single-family homes: persons relocating to the area, first-time buyers, dot-com workers and empty-nesters.
Carol Burnett, vice president and managing broker at Alain Pinel Realtors, describes the typical condo buyer as one who wants a nice living environment with minimal upkeep and lots of conveniences.
"Condo purchases have historically been a buyer's first-time entry into owning real estate, but we are seeing a wide variety of people who don't want to be full-time landscapers and housekeepers on the weekends," said Burnett. "The dot-com employee who works 60-plus hours a week doesn't have the time or energy to deal with maintaining a yard and large home, so for convenience sake, they tend to look for a nice, new condominium project. Although many of them can afford a larger home, they prefer a less maintenance-intensive lifestyle."
Burnett also sees a fair number of empty-nesters cashing out on the family home and buying into attractive, active-lifestyle communities where golf, tennis, swimming and social activities fill up the weekends, rather than yard- and housework.
David Hunt of Century 21, Seville-Contempo, works with many clients who are relocating to the area for the first time. He finds that condos usually become a fall-back position to the bigger home for one main reason--price.
"Sticker shock definitely hits hard for people who sold a 3,000-square-foot home with a one-third acre for approximately $300,000 back East, only to find that $300,000 doesn't even buy a two-bedroom, 1,200-square-foot condo out here," said Hunt.
Working with new residents to the area, Hunt has seen recruits decide to turn down an offer of six figures or more after they have conducted several searches for suitable, affordable housing. The change in their quality of life just becomes too big to make the leap, he said.
"Many times, the money is there for them to make a purchase, but the difference in degree of property pushes them to either rent or stay where they are altogether," said Hunt. "This market isn't for everyone."
The decision to purchase a condo, townhome or single-family residence is ultimately a decision based on lifestyle, budget, location and availability of properties, but in a market where both homes and condos are scarce sometimes the deciding factor simply becomes "what, if anything, can I afford to buy?"
Saratoga, California Since 1955
