Condo Sales Break Annual Record, Fourth Quarter Exceptional
February 6, 2004
WASHINGTON? Sales of existing condominiums and cooperatives surged to another annual record in 2003, while the pace of sales activity in the fourth quarter was the second highest on record, according to the National Association of Realtors.
There was a total of 898,000 existing condo and co-op sales last year, up 9.5 percent from the previous record of 820,000 units in 2002.
The sales pace dropped 5.8 percent in the fourth quarter to a seasonally adjusted annual rate* of 914,000 units from a record 970,000-unit pace in the third quarter. Sales remained 10.3 percent above the 829,000-unit level of sales activity in the fourth quarter of 2002.
David Lereah, NAR's chief economist, said this marks the eighth consecutive annual record for the condo and co-op market. "The growth of condo sales since 1995 is unprecedented and reflects a new level of demand in the market," he said. "The easing we saw in the fourth quarter was expected after a record spike in the third quarter, but sales remains exceptionally high. There is a tremendous momentum that will be driving the condo market again this year."
In the fourth quarter, the median existing condo/co-op price was $174,700, which is 14.9 percent higher than a year ago. The median is a typical market price where half of the units sold for more and half sold for less. By comparison, the typical single-family home cost $171,600 in the fourth quarter, 6.6 percent higher than a year earlier. "This is the first time the typical condo cost more than the median-priced house," Lereah said.
For all of 2003, the median existing condo price was $163,800, up 15.2 percent from a median of $142,200 in 2002. At the same time, the typical single-family resale home price rose 7.5 percent to $169,900.
NAR President Walt McDonald, broker-owner of Walt McDonald Real Estate in Riverside, Calif., said there are two reasons the median condo price has been rising faster than single-family homes. "A shortage of units available for sale has been putting pressure on prices, but we're also continuing to see a greater mix of more expensive condos that appeal to empty-nesters and other higher-income segments of the market."
Lereah said low mortgage interest rates, an improving economy and growing demand will fuel future condo sales. "We've had low mortgage interest rates for some time, but a strong demographic demand will be a significant factor for years to come. There is a growing number of households entering the years in which people typically buy a first home, while at the same time many baby boomers are trading down to easier-to-maintain properties," he said.
According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage was 5.92 percent in the fourth quarter, down from 6.01 percent in the third quarter; it was 6.08 percent in the fourth quarter of 2002. The fourth-quarter average interest rate was the third lowest since the Freddie Mac series began in 1971; the lowest averages were in the second and first quarters of 2003.
In the Northeast, condo/co-op resales slipped 0.7 percent between the third and fourth quarters to a 151,000-unit pace; however, they were 16.2 percent above the fourth quarter of 2002. The median price in the Northeast was $194,400, up 24.4 percent from a year ago.
Existing condo and co-op sales in the Midwest eased by 2.6 percent from the third quarter to a level of 112,000 units in the fourth quarter, but were 10.9 percent higher than a year earlier. The median resale condo price in the Midwest was $173,400, up 7.2 percent from the fourth quarter of 2002.
In the South, condo/co-op resale activity dropped 6.3 percent in the fourth quarter to a 417,000-unit pace; however, this was 6.6 percent higher than the same quarter in 2002. The median price in the South was $136,100, which was 11.7 percent higher than a year ago.
In the West, the sales pace of condos and co-ops dropped 9.7 percent from the third quarter to an annual rate of 233,000 units in the fourth quarter, but was 12.6 percent above the sales rate during the same period in 2002. The median price in the West was $220,000, up 21.9 percent from a year earlier.
Soure: The National Association of Realtors