Over the past several years, condos — both newly built towers and converted apartments — sprang up like mushrooms after a spring rain. Now, the market is glutted and buyers are scarce.
The National Association of Realtors reports that in November (the most recent data available), a 13-month supply of condos clogged the market. That’s the biggest backlog since the NAR began keeping condo statistics in 1999, and it’s reminiscent of the glut in the early 1980s. Although builders have pulled back, there’s still plenty in the works. The National Association of Home Builders expects this “heavy oversupply” to last through 2009.
Meanwhile, bad news — credit-tightening, foreclosures, falling home prices — has scared off buyers. Sales of condos have fallen since the peak in 2005. In November, they were down 21% nationwide from the year before.
Ironically, the median condo price in the U.S. increased 2% in the third quarter of 2007, to $226,900. But that figure reflects a large number of upscale units in the sales mix. In most markets, sellers are cutting prices and offering incentives for midrange condos, which have been largely abandoned by move-up and downsizing buyers who must sell their current homes first. Suburban condo prices are soft because fewer buyers want to commute, and resale units go begging as buyers turn to newly built condos.