For many first-time buyers, finding an affordable condo these days is like finding the end of a rainbow.
For those people who want to stop renting and start building equity, the condo market is often the first and best option, but also an increasingly competitive one.
“[Condos] are great for people coming into the market on an entry level,” said Amy Ritsko-Warren, communications director with Northern Virginia Association of Realtors. “You can find a condo for $200,000, but you can’t find single family house for that price.”
Over the last four years the average condo price in Northern Virginia has more than doubled, and the market for condos has not only increased, it has looked to the sky in the form of high-rise luxury buildings and prices to match.
Buyers who can only afford a condo that costs $200,000 or less may find they have a very limited pool to select from. In an online search of condos on the market in Fairfax County as of Aug. 21 on www.realtor.com, the official Web site of the National Association of Realtors, there were 10 condos for sale at $200,000 or less. In a similar search, there were more than 400 condos listed for sale between $300,000 and $500,000.
In a local market that is attracting active retirees to young professionals to investors, condo prices have increased at a faster rate than single-family homes in the area. In Northern Virginia, the average condo now sells for $300,000, according to Metropolitan Regional Listing Service (MRIS). But just four years ago, that average was $128,900.
On the national level, the trend is even more striking. Last year, for the first time since the National Association of Realtors (NAR) began monitoring the data, the median price of a condo exceeded the median price of a single-family home.
In June, the median value of a condo in the United States was more than a single-family home, $223,500 compared to $218,600, respectively.
SENIOR ECONOMIST for the National Association of Realtors, Lawrence Yun, said the condo market is being driven mostly by changes in demographics. “We have the baby boomers becoming empty nesters, so some are considering smaller-sized homes with condos being one of the options — that’s one factor,” said Yun. “The second factor is the children of the baby boomers, who are looking to buy their first home.”
However, Yun also said that many are drawn to the condo market because of the traffic in the region. Living inside the beltway and closer to Washington, D.C., Yun said, can be appealing. “Many people are saying, ‘Why not live closer in?’” said Yun. “They see the condo as the only option for a home in their price range that is closer in.”
Ritsko-Warren said the condo prices keep rising because of demand. “They are the only thing available that are affordable to a big chunk of the population,” said Ritsko-Warren. This group of people, Ritsko-Warren said, keeps demand high and drives prices upward.
She also said that condos can be a good option for baby boomers. “This huge baby boom generation may not be ready to retire, but they may be ready to downsize,” said Ritsko-Warren. “[Condos] have a lot of amenities and you don’t have to mow a large lawn and you might have a concierge that can take care of collecting mail and handling other needs.”
Fairfax County is expected to add more than 30,000 households in the next five years, according to John McClain, a senior fellow at George Mason University’s Center for Regional Analysis. With job growth in the area continuing to outpace housing growth, these two trends together put even more pressure on an already competitive housing market.
Ritsko-Warren sees these indicators as reasons that condos may continue to be a logical option for housing growth in the area.
“The fact is our area is becoming more dense, and more people are continuing to come in because of the good job growth,” she said. “Because of that we’re going to need higher density and that usually means condos.”
THE RISE in condo prices, however, is also making it harder for first-time buyers to afford condos, which are often the only options these buyers have.
Making the market for condos even more competitive is the increase in people who buy condos on speculation, hoping to cash-in on the rapid appreciation. “I think there is a segment of condo buyers who fall into that category,” said Yun, “but I don’t think that it is a large segment.”
Squeezing some first-time buyers out of the condo market is the increase in high-rise, luxury towers aiming to capture an equally high-end clientele. In this area, some of the newest condos being built can start at $500,000 and some of the penthouses are priced as high as $4 million.
Beginning construction about a year ago, the KSI Inc. development at the Reston Town Center called Midtown East, a 21-story condominium tower, was designed to resemble a five-star hotel more than a place of residence. The condos, which range from $400,000 to $3 million, will feature a door man, valet parking service, an outdoor pool, a fitness center and sauna, a private media-center with theater seating, and an on-site concierge that will handle dinner reservations, home care and dry cleaning.
In Arlington, the Turnberry Tower’s “power residencies” of one, two and three bedrooms, and penthouses, are priced before construction at $700,000 to more than $4 million. In addition to valet service, a concierge and an indoor swimming pool, the tower will feature larger units with a 900-square-foot balcony, a private elevator and nearly 4,500 square feet of living space — including three bedrooms, four and a half baths and a hobby room.
Many of these luxury condos are sold out before construction is completed, which was the case for Midtown East.