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| Condo market down but not Out |
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Florida Association of Realtors
February 13, 2007
Condo market down, not out
ORLANDO, Fla. – Feb. 13, 2007 – The condo craze is over but the condo market isn’t dead yet, builders and developers gathered at an industry trade show said last Thursday.
The glut of condominium projects under construction in markets such as downtown West Palm Beach means that thousands of new units will flood an already large pool.
“There are too many high-end condo projects in most cities,” said Bill Donges, chief executive of Atlanta-based Lane Co., which builds condos around the country. “Those units will have to be absorbed.
“If you’re in the market for a $1 million condo you can probably cut yourself a good deal right now,” said Donges, one of more than 100,000 industry folks attending at the International Builders Show at the Orange County Convention Center.
The Florida Association of Realtors says while the condo market has experienced the same slowdown in sales as the single-family home market, declines in local markets have been less severe.
For example, 2006 condo sales in Palm Beach County fell 28 percent from the previous year, while single-family-home sales dropped 37 percent, the association says.
But the year-over-year decline of 31 percent in Treasure Coast condo sales outpaced the region’s single-family-home sales decline of 28 percent last year, according to the Realtors’ group.
Sharon Dworkin Bell, the National Association of Home Builders’ senior staff vice president for multifamily housing, said condos remain an attractive “lifestyle choice” for many home buyers. Developer Donges agreed.
“Today’s buyers want to live close to work, transportation, entertainment and retail,” he said. “A great location, a distinct product and a good price for your market are critical to a condominium community’s success.” Developers say don’t expect condo construction cranes to create downtown traffic jams forever.
But from Miami to West Palm Beach, there are thousands of unsold condo units that have to be absorbed as a result of builders trying to satiate the region’s perceived demand for condo units. Many of the region’s high-end rental properties were also converted to condos. But that all came to a screeching halt last year as a growing number of high-priced units found a shrinking number buyers.
As a result, developers are turning their attention to a growing demand for rental apartments.
“Apartments are absolutely back,” said Steve Patterson, president of ZOM USA of Orlando. “Demand is up.” This increased demand is driving apartment rentals up, but the cost of renting compared with buying is at a historic low, Patterson said.
Because income has not kept pace with double-digit home-price appreciation, many would-be home buyers have become or remained renters.
In Palm Beach County, a survey by the Housing Leadership Council showed that 90 percent of the workforce could not afford the median-priced single-family home, which cost more than $390,000 at the time.
For all of 2006, with the boom over and housing prices falling, the median-priced single-family home remained out of reach at $384,700.
At the peak of the condo frenzy, developer Donges said, he was building about 80 percent condos and 20 percent rental apartments.
Today, with investors out of the condo market, Donges said the 2007 forecast calls for a reversal in the multifamily formula: condos, 20 percent; rental apartments, 80 percent.
This is especially true in markets where the rental market is tight, such as Palm Beach County, where some of the rental properties that converted or began converting to condos during the housing boom have begun turning back to rentals.
In markets where affordability is a major issue, such as Palm Beach County, rental apartments will be a prime focus of developers, Donges said.
Copyright © 2007, The Palm Beach Post, Fla. Distributed by McClatchy-Tribune Business News.
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