Condo Market to Be Strong in 2006, Experts Say

Desire to get into the real estate market has pushed up demand for condominiums and brought prices up as well.
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In condominium complexes in California, real estate signs hang from patio overhangs or are tucked into front bedroom windows, accenting the fact there is no lawn to bury the traditional wooden posts.

The desire to get into the real estate market has pushed up demand for condominiums and brought prices up as well. Experts forecast the same pressures will keep buyers willing to share land to have homes of their own.

For Kathlene Hughes, a two-bedroom condominium in Ventura was a great financial move.

"I would never have been able to afford a single-family home," she said. "It's a fantastic investment." Homeowners association fee increases have caused her to rethink living in California at all. Her condominium went up for sale about three weeks ago.

Right now the two-bedroom, one-bathroom unit is listed at $318,000.

Hughes said she is realistic about the slow market in December and the competition from other units in the area. She will keep the for sale sign up but doesn't expect a sale until well into the new year.

The equity should be enough to give the early childhood development teacher a down payment for a home in another state and a little seed money for her grown children who are staying in the area.

A continued affordability crisis is bound to keep the pressure on the lower end of the market, which in many cases is condominiums, said Leslie Appleton-Young, chief economist for the California Association of Realtors.

Overall, Appleton-Young said the market is getting less frenetic, but the desire to get into the market is still strong.

"It is still a very, very tough market for people getting into the market for the first time," she said.

The median price of a condominium in California was $434,540 in November, up 14.9 percent from a year earlier. For a single-family home the median price was up 16.2 percent to $548,400 during the same time period, according to the California Association of Realtors.

The association does not track condominium price for counties, but Ventura County's median price for a single-family home was $677,780 in October, the last reported numbers.

The median price is the point at which half the sales are more and half are less.
For single-family homes, Appleton-Young is expecting appreciation to run from 6 percent to 12 percent in coastal regions.

Demand for condominiums is not likely to let up any time soon, said economist Bill Watkins, director of the University of California, Santa Barbara, Economic Forecast Project, noting there is a limited supply of housing and especially condominiums.

"If we assume that home prices stay as high as they are, there will still be working people that want to live here," he said. "They will take what they can buy locally." Watkins is the owner of a condominium in Ventura and one in Bishop.

The appreciation rates on condominiums have been very strong the past couple of years, and that is likely to slow down to single-digit percentage increases, said Realtor Gary Klein of Troop Realty in Ventura.

"Condos are still a great starting place," he said.

He advises a buyer to have at least a five-year plan to stay in a home to ride out any bumps in the market but said the demand for affordable homes will likely keep the prices up.

"I think our little area here will remain fairly insulated from any big drops," he said.
Not all condominiums in Ventura County are the $300,000 starter homes. There are units in the county listed for more than $1 million.

Many condominiums, in fact, are not aimed at buyers seeking affordability.

The Whitesails development in Oxnard has 88 condominiums at the Channel Islands Harbor. The property was marketed generally as a second-home development, and the units were as popular as any single-family home, said Bill Rattazzi, president of the developer John Laing Homes Los Angeles/Ventura division. The units sell for more than $600,000, and there already is an interest list for those in the next phase.

He said the irreplaceable location makes the property less susceptible to market fluctuations.

High-density projects will flourish "Whatever happens in the marketplace, I think it is going to happen here last," Rattazzi said.

It's not just waterfront property that Rattazzi has faith in. Ventura County in general has such a need for housing and a political climate that makes major development difficult that high-density projects will flourish, he said.

The Save our Open Space and Agricultural Resources initiative has restricted development in Ventura County, making many large parcels of land unavailable to home builders. There is a shrinking amount of land that is available for housing, and it often competes with other forms of commercial or retail development.

"There will be a bigger and bigger market for small-lot single-family as well as well thought out multifamily," he said.