If you purchased a condominium before the real estate crash, you may be wondering if you’ll ever be able to break even on it.
While that day has not yet arrived for everyone, the condo market is improving in many places. And in some areas, condo prices are almost back to pre-crash levels.
Median Sales Prices Up in Metropolitan Areas
Nationwide, the median sales price of existing apartment condo-coop homes in metropolitan areas was $181,000 in the three-month period ending September 2012, according to the National Association of Realtors.
That’s an increase of 7.7 percent over median prices in the quarter ending a year earlier (September 2011), according to the real estate organization.
The improvement varied by region and by metropolitan area, with 33 areas showing year-ago increases, while 21 areas showed declines.
The strongest improvement by far was in the West, where the median price of $209,100 was up 26 percent from the previous year.
In the South, prices were also up, rising 16 percent to $129,500, while the Northeast crept up 1.1 percent to $250,700. The Midwest declined slightly, 0.5 percent, to $132,100.
Individual Markets Vary
Individual markets varied even more. In Atlanta, the median sale price of $74,000 was up a rollicking 77.9 percent one year, leading the nation.
At the other end of the scale, median sale prices in the Bridgeport-Stamford-Norwalk metro area in Connecticut slumped 59.8 percent to $90,000 from third-quarter 2011 to third-quarter 2012.
Prices are still far below their peaks, however. The S&P/Case-Shiller Index, which tracks condo markets in New York, Boston, Chicago, San Francisco and Los Angeles, found prices in July in nearly all those areas continued a string of monthly increases going back five months.
The company’s report noted that prices were still only at mid-2005 levels in the New York area, but the Big Apple region suffered relatively little during the crash, so prices there today are less than 10 percent below the 2006 peak.
In Chicago, the picture is grimmer, with prices only back to where they were in mid-2000, more than 12 years ago, and still down by a third from the 2007 peak, the company said.
Factors Driving the Price Increase
Several factors are driving the price increase.
The general condo demand is rising while supplies are tight. Fewer foreclosures are coming onto the market, and existing owners are waiting for prices to rise further before putting their units up for sale.
Builders are beginning to ramp up construction, but are being slowed by financing issues.
Buyers also continue to face difficulty in obtaining mortgages for purchase money. The financing problem is attributed to tight underwriting standards rather than high interest rates.
In fact, the NAR said rates on 30-year conventional fixed-rate mortgages averaged a record low of 3.54 percent in the quarter ending September 2012. That was down from 3.8 percent in the previous quarter and 4.31 percent during the same period in 2011.
The Future of the Condo Market
The condo market’s future looks better than it has in some time, according to those who build them.
The National Association of Homebuilders quarterly Multifamily Production Index, which measures how confident builders and developers are about the market, hit its highest reading since 2005 in the second quarter of 2012, ending in June.
After improving for eight consecutive quarters, builder confidence clearly has momentum, and it may take a while to run out.
The NAHB notes that the industry is constructing about 200,000 new multi-family units a year. That’s up quite a bit from the historic lows of about 110,000 in 2009 and 2010.
But before the crash, about 300,000 new multifamily units were being built every year for 12 straight years.
So, if you’re wondering whether the condo market is making a comeback, the answer is that it has already made a significant comeback, but it’s still got a long way to go if it’s going to get back to where it was.
“Is the Condo Market Making a Comeback?” was written by Mark Henricks.