October 21, 2013 — In the depths of the 2008 real estate meltdown many developers decided to turn their new condos into rental units, rather than take a bath on prices and unsold inventory. That strategy, for those who could afford to wait, seems to worked out rather well. If you have held off selling your home until now, the return to a stronger market could be beneficial to you too, particularly if you are not planning on replacing it.
The Wall St. Journal recently reported in “Condos Going Back Up for Sale” that many luxury rental units in places like California and Florida are now coming on the market as condos. While the pace of conversions from rental apartments to condos is a fraction of the torrent that came in pre-bust years, the rate is the highest it’s been since 2008. In 2012, 2,080 apartments were converted to condos from rentals, compared to 152,206 conversions in 2005.
The trend in condo conversion confirms recent housing data which show that a decline in inventory has put pressure on sales (down) and prices (up). The National Association of Realtors (NAR) reports that existing-home sales (single-family homes, townhomes, condominiums and co-ops), declined 1.9 percent in September from August levels, although they are 10.7 percent above the pace in September 2012. Sales have remained above year-ago levels for the past 27 months as the housing recovery has continued.
Even though builders have responded to demand by building more new homes and condos, that has not made up for the decline in inventory. One report we saw recently showed that the supply of unsold condos and townhomes in some South Florida counties is down 66% from 2008 levels.
Prices up, Inventory and Time on the Market Downs
The national median existing-home price for all housing types was $199,200 in September, up 11.7 percent from September 2012. Total housing inventory is at 5.0 months supply, and the average time on the market is 50 days.
Bargain days over?
The tightening of inventory, rise in prices and interest rates, and decline in short sales and foreclosures all point to better times for builders and home sellers. As a potential home buyer that might be OK, assuming you have something to sell. First time buyers will undoubtedly be the hardest hit.
Comments? What do you think is going on today’s real estate market? Is this a good time to sell or buy? Are you holding on to a property in the hope it might bring a better price in the future, or not? Let us know in the Comments section below.