With widespread speculation on falling home prices, where the housing market is going from here, and how to maintain the foreclosure backlog, a limited amount of data focuses on the downtown condo market. According to Paul Dales, senior U.S. economist for Capital Economics, the overlooked properties are doing slightly better than single family homes in the current market state. Big-city condo prices are expected to decline less than single home family properties in the next year, said Dales to The Chicago Tribune.
Condos make up 6 percent of all homes, so available data is limited to reports from the S&P/Case Shiller 10-City Index and 20-City Index, which is what Dales used to reach his conclusion.
Dales compared data from Chicago, Los Angeles, San Francisco, Boston and New York, finding that condo prices have outperformed single-family home prices nationally, for several years. In good times, condo prices rose twice as much as single-family home prices, and in harder times Dales said that condo prices fell 25 percent, while (in these same cities) home prices fell 28 percent.
Most recently, this year through February, condo prices demonstrated a 5.1 percent drop, but single-family homes fell only 2.3 percent; however, Dales expects this to balance out as the home prices are expected to drop by five percent in 2011 and condos to drop less.
“Firstly, there’s been a shift in demand toward smaller properties in the United States, and that includes condos. Since January 2009, condos’ share of existing sales has risen from 10 percent to 13 percent, driven by cash buyers and investors, who will favor condos over single-family homes if they’re looking for rental income,” said Dales to The Chicago Tribune.
Dales also noted that mortgage delinquency rates are lower for condos in comparison to single-family homes, a sign that fewer condos are being foreclosed.
“We’re thinking maybe early next year the U.S. will see a bottom to the falling market, and that would be a good thing. But our research suggests that once we reach the bottom, house prices are going to bounce around there for a bit longer,” added Dales.