Hot and Not-So-Hot Markets For U.S. Condo Owners

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Hot and Not-So-Hot Markets
For U.S. Condo Owners

By Lauren Baier Kim and Jared Flesher

The sizzling condo market continues to make headlines. The median price for a condominium surpassed that of a single-family home for the first time last year. And it appears that this year will be the 10^th consecutive record-making year in terms of rising U.S. condo prices and the number of condo sales, with median condo price tags still above those for single-family homes, says Walter Molony, spokesman for the National Association of Realtors. In September, the U.S. median condo price of $213,600 was up 9% from September 2004.

Chasing Condos Investing in a hot market without getting burned. Coming up this week: Wednesday: Retreats: A look at three ultra-lux condos on the market. Thursday: Fiscally Fit: When your rental is going condo, should you stay or go? Also on Thursday: Go Figure: Flipping condos Friday: House Talk: June Fletcher on where the condo market is headed for investors.

This week, RealEstateJournal.com takes a look at five hot condo markets in the U.S. and four not-so-hot markets. How did we pick them? We started with metro areas ranked in the top 25 markets in terms of condo price appreciation between 2000 and 2005, according to Fidelity National Financial, a real-estate service company in Jacksonville, Fla.

From there, we looked at those locales that landed among the top 20 markets for new condo construction in 2005 as of Sept. 30, according to REIS Inc., a real-estate research firm that surveys industry professionals about condo development. Price gains indicate healthy buyer demand over the past five years, and development suggests that builders have high hopes for the market in years ahead.

For not-so-hot markets, we did the opposite -- we started with the bottom 25 markets in terms of price appreciation, and then looked at those that currently trail for condo units under construction.

There are some red-hot locales that didn't make our list, like Ventura, Calif., where prices have risen 129%, but the level of condo development didn't hit REIS's radar. Fort Walton Beach, Fla., which topped Fidelity National Financial's list for price appreciation at 206%, wasn't included because, like several other locales, there wasn't a match for that precise location on REIS's list of metro areas for condo development.

Related Link To learn more about what to keep in mind in evaluating the market your city, read: "Timing the Market for a Condo Purchase."

Ultimately, we can't say these markets are the hottest, or coldest, or that they'll even stay that way. While high condo price appreciation and new condo construction can identify currently active condo markets, heavy condo construction could slow price appreciation over time, notes Mike Sklarz, a senior vice president with Fidelity National Financial. "New construction and price appreciation have an inverse relationship," he says, because of the possibility of supply overpowering demand.

One of the hot condo cities we identified, San Diego, has some of the biggest risks nationwide of undergoing price declines in the next two years -- more than a 50% chance, according to PMI Mortgage Insurance's U.S. Market Risk Index report, released in October. One of our not-so-hot cities, Memphis, Tenn., has the lowest chance of price declines, the study says.

Click on the city names in the tables below for a detailed snapshot of each condo market.

Hot Markets

Market	Price gain 2000-2005	National rank by 2000-2005 price gain*	No. of units under construction 2005**	National rank by no. of units under construction+
1. New York	156%	7	3,607	2
2. Fort Lauderdale, Fla.	149	9	3,545	3
3. San Diego	140	12	2,624	7
4. Miami	122	20	6,390	1
5. Washington, D.C.	117	23	2,365	9

* Ranking among 123 U.S. metropolitan statistical areas
** Note: Based on a quarterly survey tracking projects with 35 or more units and smaller projects in markets where lower density is customary.
⁺ Ranking among 75 U.S. metropolitan statistical areas
Sources: Fidelity National Financial, REIS

Not-So-Hot Markets*

Market	Price gain 2000-2005	National rank by 2000-2005 price gain**
1. Dayton, Ohio	13%	115
2. Memphis, Tenn.	15	110
3. Cleveland	15	108
4. Oklahoma City, Okla.	18	101

* Note: These markets ranked at the bottom of REIS's list of 75 metro areas for condo construction activity.
** Ranking among 123 U.S. metropolitan statistical areas
Sources: Fidelity National Financial

Where do you think the condo market is headed in your area? Join the discussion and share your thoughts with other RealEstateJournal.com readers.

-- Mr. Flesher is an intern with RealEstateJournal.com, and Ms. Kim is a senior editor with RealEstateJournal.com.

Email your comments to lauren.kim@dowjones.com.

-- November 07, 2005