Condominium Sales Surge Again

 

Condominium sales for 2003 set another national record despite a slight dip in fourth quarter transactions, the National Association of Realtors reported.

Nearly 900,000 existing condominium and cooperative units changed hands last year, up 9.5 percent from the 2002 total of 820,000 units and the eighth consecutive record-setting year for the condominium sector. Fourth quarter sales fell by nearly 6 percent from the third quarter peak, to a seasonally adjusted annual rate of 914,000 units, but still remained 10.3 percent above the fourth quarter of 2002, according to the NAR report.

“The growth of condominium sales sine 1995 is unprecedented and reflects a new level of demand in the market,” David Lereah, chief economist for the NAR, aid. “The easing we saw [nationally] in the fourth quarter was expected after a record spike in the third quarter,” he added, “but sales remain exceptionally high. There is a tremendous momentum that will be driving the condominium market again this year.”

Reflecting that strong demand, the median price increased by 14.9 percent to $174,700, rising above the median detached single-family home price ($171,600) for the first time. Regionally, condominium sales in the Northeast declined slightly between the third and fourth quarters, but still finished the year above the 2002 pace, while the median price, at $194,400, was up more than 24 percent for the year. The West posted the sharpest sales decline for the quarter at 9.7 percent, but still ended the year up 12.6 percent above the 2002 sales pace. Median condominium prices in the West increased by nearly 22 percent to $220,000. The Midwest and South both posted more moderate price gains of 7.2 percent and 11.7 percent, respectively.

NAR analysts attribute the price trend for condominiums nationally to a relative shortage of for-sale units coinciding with growing demand from both empty-nester baby boomers and first-time buyers, seeking affordable entry-level homes. Low interest rates and rising home prices have also helped to propel condominium sales to record levels, analysts agree.

Because of the slow pace of multifamily construction in the Northeast generally and in Massachusetts specifically, the supply-demand imbalance in the condominium market should continue to favor sellers over buyers, at least for the near term. But a sharp decline in single-family home prices (which few economists are predicting) or prolonged weakness in the area job market could alter that forecast.