From San Diego to Washington, D.C., condominiums are hot property.
Demographic and economic trends have driven up demand for the once-unpopular real estate — even more so than for more traditional homes.
“It's a perfect combination of events to lead to a strong condo market today in the U.S.,” says Susan Wachter, professor of real estate at the University of Pennsylvania's Wharton School.
Wealthy baby boomers looking to downsize, relocate to cultural centers, or acquire low-maintenance second homes are snapping up high-priced condos in cities and resorts. Many young couples are making condos, rather than single-family homes, their first real estate purchases. And low interest rates have pushed young singles to buy apartments instead of rent them.
Condominiums are not worry-free, though some marketers will argue otherwise. Historically, condos were often entry-level homes, so their prices declined faster than regular homes in a down market, and increased more slowly in the upturns. And owners need to make sure the buildings are well managed.
However, there are plenty of advantages to condo ownership. The shared costs of maintenance are less than they would be for a single owner. In many cities, they can be affordably close to museums, public transportation and workplaces. Unlike in rental apartments, owners can paint and remodel as they please. And many condos come with amenities, such as tennis courts and swimming pools, which would otherwise require much fuss and expense. Plus, doorman and secure entrances mean owners can shut the doors to their units and depart for months on end.
More units, higher prices
It all adds up to more units being built and, for the time being, higher prices. The National Association of Realtors estimates that 970,000 existing condos and co-ops were sold in the U.S. last year. That's up 8 percent from 2003.
Even more dramatic, the median price for an existing condo in 2004 was projected to be $193,600, up 17 percent from 2003. By comparison, the median price for a single-family home was pegged slightly lower — at $184,100 for 2004, up just 8 percent from the year before, according to the NAR.
While many people use the term condominium to refer to non-rental apartments, the term describes a type of ownership, not architecture. In a condo project, each owner has title to a unit and common areas are owned collectively. But the units can be apartments, townhouses, and even commercial spaces.
Builders and developers have responded to demand by building even more condos, says Gopal Ahluwalia, vice president for research for the National Association of Home Builders. In 1993, a total of 32,000 condo and co-operative units were completed. By 2003, that number had risen nearly 30 percent, to 41,300. The vast majority of new units are in the South and the West, he says.
Those aren't the only regional differences. In Manhattan, 80 percent of the apartment market consists of co-operative apartments, which differ from condominiums in that buyers acquire an ownership share that gives them the right to live in a unit — and those owners often have to be approved for membership by a board.
“The need for condos is so great,” says Larry Schier, a broker with The Corcoran Group in New York. “A lot of people are sick and tired of the co-op board approval process and they don't want to deal with that insanity.”
Then again, co-ops can be more expensive because they are exclusive. The top-priced apartment in New York isn't a condo but a co-op, the historic $70 million triplex penthouse owned by financier Martin Zweig.
New York has seen several new, uber-luxury buildings rise in recent years. That includes the new Time Warner Center, where in 2003 financier David Martinez paid a record-setting $42.25 million for a full-floor condo. New York has also been the site of numerous conversions (the famed Plaza hotel will close this spring, and reopen in 2006 with more condos than hotel rooms), as have cities such as Philadelphia and Washington, D.C., where the old Columbia Women's Hospital is being turned into the Columbia, a high-priced condo development.
“When I started, people really didn't think of condos and co-ops,” says Gigi Winston of Winston & Winston Real Estate in Washington, D.C., who has been a broker for nearly 20 years. “Now that market has become the market.”
In Miami, high-end luxury condos have bloomed in South Beach. In Las Vegas, where entertainer Paul Anka reportedly paid $1 million for a condo at the Park Towers, upcoming projects include MGM's Mirage Project City Center, which will have 1,650 condo units.
“With the exception of Las Vegas, I think San Diego is seeing more activity than any city in the country,” says Jim Shultz, a broker with Coldwell Banker in La Jolla, Calif. “Downtown San Diego is booming like crazy.”
In a city of just 1.2 million (and where John Moores, owner of the San Diego Padres baseball team, lives at the top of the Omni San Diego Hotel), there are 17 high-rises under construction, Shultz says. “And it's accelerating — 4,000 units are coming online in the next six months. People are coming in droves.”
In San Diego, 67 condos are currently priced at over $1 million, he says. It's just another sign of the burgeoning super-luxury condo market, where owners can have high-end services and an amount of space that is comparable to a single-family home.
“We're getting a lot of insurgents from the suburbs, the Main Line area,” says Diane Bryant, a luxury broker with Rittenhouse Realty in Philadelphia. “When you get a person who was living in a 10,000- or 15,000-square-foot center Colonial, it's hard to do a 2,000-square-foot condo. You need something bigger.”
So what are buyers getting for top dollars? Often, the top apartment — or at least something that bills itself as a penthouse. Then there are doormen, swimming pools (sometimes private to the unit), spas, terraces and balconies, wine cellars, access to transportation, views and perhaps valet parking. In hotel condominiums, owners may have access to room service, maid service and concierge service. There are no lawns to care for or roofs to fix.
In tallying the most expensive condos in the U.S., it became clear that New York City would have dominated the list, with many priced at well over $20 million. In order to give the list a more national scope, the results were determined on a regional level.