The Real Deal
Condo sales up sharply to start year
By Jean Newton
Sales of existing condominiums and co-operatives rose to a new record level during the first quarter of 2001, according to the National Association of Realtors.
The seasonally adjusted annual rate for existing condo and co-op sales was 763,000 units in the first quarter, up 5.8 percent from a 721,000-unit rate in the fourth quarter of 2000. It remains 8.1 percent above the 706,000-unit level of sales activity in the first quarter of last year.
David Lereah, the National Association of Realtor's chief economist, said lower interest rates were fundamental in setting the new record. "Mortgage interest rates were 1 1/4 points lower in the first quarter than they were a year ago. In addition, strong household formation is creating more first-time buyers, who opt for the affordability and lifestyle factors in condo living," he said.
According to Freddie Mac, the average commitment rate on a 30-year conventional fixed-rate mortgage was 7.01 percent; down from 7.64 percent in the fourth quarter; it was 8.26 percent in the first quarter of 2000.
National Association of Realtors President Richard A. Mendenhall said baby boomers also are a factor in record condo and co-op sales. "Older households also are seeking simpler lifestyles, but are accustomed to a lot of amenities, so higher-end units also are selling well," he said.
Nationally, the median existing condo price was $117,700 in the first quarter, which is 7.8 percent higher than the same quarter in 2000. The median is the midpoint, which is a typical market price where half of the units sold for more and half sold for less. By comparison, the median-priced existing single-family home was $139,700 in the first quarter, up 4.4 percent from a year ago. The typical single-family home costs 18.7 percent more than the median-priced condominium.
"The fact condo prices are rising faster than single-family homes reflect both strong demand and increasing sales of higher-priced units," Lereah said.
In Silicon Valley, where rents reached new heights during the past year, townhome and condominium purchases could be a very good investment said Kathy Stakey, a condominium and townhouse specialist with Coldwell Banker in Saratoga.
"While the high-end single family home market seems to be taking a slight dip, there are still some excellent properties for savvy buyers, especially in the townhouse and condominium market. Many of these purchases allow buyers to make payments that are no more than their current monthly rent," she said.
Stakey notes there is ample inventory, although buyers seem to be taking a "wait-and-see" attitude. She has been holding open houses each weekend at different condos.
"I am discovering that all buyers for both single family homes and condo/townhouses are not in a hurry and are keeping an eye on prices. I am telling my buyers to move forward and make a decision while the selection is so vast and their negotiating power is strongest. Buyers need to make their decision now or they will be left behind as this market will open up quickly. You snooze, you may lose," said Stakey.
Information provided in this column is presented by the Realtor members of the Silicon Valley Association of Realtors. Send questions on any topic to: Real Deal, c/o SILVAR, 345 San Antonio Road, Los Altos, CA 94022; call 650-949-9115; or email to ppompei@siliconvalley-realtors.org.
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