In April, for the first time in at least 25 years, the median price of a condominium in Massachusetts exceeded that of a single-family home.
According to The Warren Group, publisher of Banker & Tradesman, the median price for a condo in April was $280,000 – $5,000 more than a single-family home during the same month. That has never happened in any single month or year since The Warren Group began tracking and publishing condominium data in 1987.
Over the past quarter century, the average annual difference in prices between single-family homes and condos was roughly $46,000. The biggest difference was $75,000 in 2005, the smallest $16,000 just last year. But through the first four months of 2012, the delta between the two has shrunk to just $7,650 – $264,900 for a single-family, versus $257,250 for a condo.
For whatever reason, condo owners seem to be holding a much firmer line on pricing than owners of single-family homes – and have been doing so for years.
In 2008, as the residential real estate market began its rapid descent, year-over-year single-family home prices fell 11.5 percent. But condos lost only 1.8 percent of their value over the same period. Last year, as single-family homes bled off another 3 percent in value, condos gained almost 1.9 percent. Through April of this year, condos have risen more than 4 percent in median value, compared with a roughly .8 percent fall in single-family home prices.
The question is, why?
Because condos are more easily rentable, and perhaps because they are often owned as investments and not primary residences, condo owners have more options if/when they get into trouble. Unlike the single-family homeowner forced to sell at fire-sale prices and/or face foreclosure when a job is lost or circumstances change, a condo owner can choose to rent her unit to help pay the mortgage. Or, if her own primary residence is in trouble, she can choose to sell the larger home and move into the smaller condo. Either way, not being forced to sell for lack of better options means condo owners can hold out for more acceptable offers.
Looking further at the data, for the past several months, year-over-year sales of single-family homes have risen, even as prices have fallen or remained flat. Through April, year-over-year sales are up more than 18 percent, but prices are down .8 percent.
One likely conclusion to be reached from this data is that more lower-priced homes are being sold. After years of foreclosures, the inventory of discounted single-family homes and short-sale opportunities has only grown – and all the while, new single-family construction has been almost non-existent.
Not so for condos. The relative abundance of new condo developments coming on line in recent years has been decidedly skewed toward the upper end of the market. Selling a handful of urban condos in the $750,000 to $1 million range can pull median prices up just as easily as selling a number of $250,000 single-family homes will drag them down.
Conventional wisdom says the larger size, enhanced privacy and inherent individuality of single-family homes should make them more valuable over the long run. History has overwhelmingly proven this, and we aren’t expecting any major deviations from this philosophy for the foreseeable future.
But for one month out of the past 300-plus, conventional wisdom was turned on its head. Even if it never happens again, a precedent has effectively been set. If buyers really are beginning to value the convenience, ease of maintenance and central locations offered by condos over the more traditional lawn and picket-fence lifestyle, it would represent a sea change in residential attitudes compared to the past century of suburban growth.
And that, in turn, presents any number of monumental policy and planning challenges in the years ahead.
