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Condo Market Still Important for Multifamily

Think the pressure from the condo market is alleviating? Think again.

By Sule Aygoren Carranza | Updated on July 20, 2009

BOSTON-Could the housing sector be feeling the first twinges of a recovery? If the data recently trickling in are any indication, it could be. Housing sales are actually rising in the country’s most depressed markets, including Nevada, Arizona, Florida and California, and average home prices are declining across the US at a lower pace as well. There’s less product being offered for sale and for shorter periods of time, and the vacancy rate among for-sale homes is also ticking down.

Yet all of that good news is mainly on the single-family residence side of the market. The story is significantly different on the condominium side of the equation.

Over the first six months of the year, the median price for condominiums has leveled off and sales activity for condos on the market has picked up. Still, the available inventory remains high and, therefore, units put on the market are staying there for a longer period of time than before; approximately 15 months. According to Gleb Nechayev, a senior economist with locally based Torto Wheaton Research, it takes, on average, twice as long for a condominium unit to attract a buyer today than it did three years ago. As a result, the overall vacancy rate for owned multifamily product is on the rise.

Nechayev points out that sales durations for both single-family and condominium residences need to fall significantly before “meaningful growth” in prices can be seen. For this, you need “a combination of rising sales and falling for-sale inventory,” he notes. “While both housing segments are already on this path, condominiums are likely to lag unless sellers in the near term become willing to accept much lower prices.”

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