Condo Market Shakes Out

Posted By:Tara Siegel Bernard

It's a great time to look for a condo -- but it's likely to get better in the months ahead.

Whether you're looking for a vacation home or to downsize your primary residence, the surplus of condos in some of the nation's hottest regions clearly makes this a buyer's market. That includes places like San Diego, Phoenix and Las Vegas, where both builders and investors are trying to unload properties into an already soft marketplace.

Of course, if you wait until later this year, you might land even get better deals. That's particuarly true in southern Florida, where the shakeout in condo prices isn't over.

“The pressure on developers to sell will continue to grow, not decline, over the next few quarters because there will be more and more new inventory coming onto the market,” said Ron Witten, founder of Witten Advisors, a Dallas-based multi-family market research and advisory firm.

Indeed, as one of the most speculative areas during the housing boom, many developers started condo projects just as the market peaked. Now, those units are set to hit the market this year and next, which is why some experts are advising buyers to bide their time. In fact, some 200,000 new units will be completed by 2008, according to Bernard Markstein, senior economist for the National Association of Homebuilders.

“From a buyer’s perspective, there would be more risk in buying today rather than buying nine months from now or something in that range,” Witten added.

Builders won’t be the only ones looking to sell. Speculators who rushed in and bought condos by the handful in hopes of flipping for a hefty profit later on will also be looking for buyers, as will many of the lenders themselves. Foreclosures are on the rise because many individuals bought homes when credit came easy, often with enticingly low introductory interest rates or little money down.

“The poster children for excess construction generally reside on the coasts in markets where home price appreciation have boomed,” said Suzanne Mulvee, senior real estate economist with Property & Portfolio Research, a Boston-based real estate research firm, which expects further price declines throughout 2007. “That includes Florida - especially Tampa, Miami and Orlando - Chicago, Las Vegas, Palm Beach and San Diego.”

While the ripple effects of the boom are apparent across the country, prospective condo buyers need to closely evaluate their local markets before deciding to hold out or take advantage of the relative deals on the market now. For instance, in some markets like Washington D.C., developers are already properties off the market and renting them until the market shows signs of stabilization, real estate consultants said.