Real Estate

Condo market expected to be stable

Here's something almost everyone knew before today, but let's make it official: The majority of condo buyers are looking not just for a home, but for a lifestyle.

It's not that lifestyle doesn't play a role in other kinds of housing. The very fact that families have gotten smaller over the last 30 years but the number of bathrooms per house has increased is proof of that.

Yet a National Association of Home Builders survey shows that nearly half of all condo buyers make their choices without considering any other style of housing.

The survey was based on a random sample of 1,008 households that had purchased condos, balanced among the four geographical regions of the country, and representing the low, middle and high ends of the market, said Gopal Ahluwalia, staff vice president of research for the home builders' group.

"This is the first research study that probes the question of where condo buyers buy, why they buy there, and what amenities they look for to complement their new lifestyle choice," Ahluwalia said.

Now that builders have lifted the decades-old quarantine around cities and have jumped in with both feet, the condo has come into its own. Condos seem to be a better fit for central cities, close-in suburbs, and resorts. They still represent a small percentage of residential construction in newer suburbs.

Most industry experts expect the condo market - which had reached nearly half of all multifamily housing starts in 2005 - to stabilize at a healthy and sustainable 30 percent of the roughly 350,000 multifamily units produced annually.

Two groups of buyers drive the condo market: young, well-paid professional singles or couples who want to own their first home close to urban amenities, and older people who want to remain in the suburbs but shed the maintenance burden of a house.

In the survey, released at a news conference at last month's International Builders Show in Orlando, Fla., both groups clearly indicated that they expect their condos to appreciate in value.

Survey participants identified price and location as the top two factors determining their decision to buy a particular property, followed by size, desirability of the neighborhood, and investment potential.

Of the 3.7 million condos in the nation, 2.5 million are owner-occupied, and 1.2 million are renter-occupied, the home builders' group says. About 27 percent of owners are 35 or younger, while 18 percent are between 35 and 44.

Of all condo buyers, 28 percent are 65 or older, while just 13 percent are 55 to 64, the survey says. The annual household income of 41 percent of those buyers is $50,000 or more. More than half of condo buyers are single; just 9 percent are married with children.

Looking at those percentages, another survey finding makes perfect sense: The most often-used condo amenities are, in order, cable- or satellite-TV hookups, high-speed Internet access, swimming pools, concierge services, and fitness rooms.

Although overbuilding and too many investors have created problems in some condo markets _ especially Las Vegas, Miami, Washington and Boston _ data show that other markets like Philadelphia's remain healthy for the long term because of the absence of either element.

At the Builders Show, several speakers said that despite the market slowdown in some metropolitan areas, the long-term condo outlook for the nation as a whole is encouraging.

"The core buyers for our product are single, without children, who want a lifestyle that allows them to enjoy the amenities inherent in a downtown environment," said Judd Bobilin, executive vice president and chief development officer of the Atlanta-based Novare Group, which is developing about 5,000 units in the South and Southwest.

Bernie Markstein, senior economist for the home builders' association, said the long-term forecast that condo starts would account for about 30 percent of overall multifamily starts is sustainable.

In the short term, as condo construction retreats in many areas, industry observers said, the next wave of multifamily-development activity is likely to be in rental apartments, especially where the supply is tight.

Still, despite this lull, "condo development won't go away," said Sharon Dworkin Bell, the builders group's senior staff vice president for multifamily.