Survey Finds Price and Location Drive Condo Sales
Nearly half of all condo buyers choose their new homes without considering any other style of housing, according to a new survey by NAHB examining the preferences of condo buyers.
Based on responses in September from more than 1,000 condominium residents who bought within the past two years, the survey also found that price and location were the two most important factors determining condo buying decisions. Each was cited by 70% of the respondents.
Condos accounted for nearly half of all multifamily starts in 2005 but have since run into some oversupply problems in many of the industry’s leading markets. As conditions improve, condo building activity is expected to stabilize at a healthy and sustainable 30% share of the approximately 350,000 multifamily units expected to be produced annually during the period ahead.
According to the survey, two groups of condo buyers are driving the condo market: young, well-paid professional singles or couples who want to own their first home close to urban amenities; and older households who want to remain in the suburbs but shed the maintenance burden of a house. Both groups also clearly indicated that they expect their condos to appreciate in value.
“The core buyers for our product are single, without children, who want a lifestyle that allows them to enjoy the amenities inherent in a downtown environment,” said Judd Bobilin, executive vice president and chief development officer of the Atlanta-based Novare Group, which currently has more than 5,000 condo units in development.
Bobilin noted that buyer traffic at his properties is comparable to the traffic the company saw in 2004, with sales continuing to average about five units per month. He also said that the number of out-of-state purchasers at his properties has dropped to about 20% or less, an indication that buyers — not speculators — are currently driving sales.
Bobilin’s customers, like the participants in the NAHB survey, identified price and location as the top two factors determining their decision to buy a particular property, followed by size, desirable neighborhood and investment potential.
“This is the first research study that probes the question of where condo buyers buy, why they buy there, and what amenities they look for to complement their new lifestyle choice,” says Gopal Ahluwalia, NAHB’s staff vice president for research.
Survey respondents came from all four geographical regions of the country and represented the low, middle and high ends of the market.
Included in the survey findings:
- More than half of the condo buyers were buying a home for the first time (54%). Among those under 35 years, 86% were first-time buyers. Seventy-five percent of those buying a converted rental property, 54% of existing condo unit buyers and 44% of new property buyers were first-timers purchasers.
- Forty percent of the buyers previously owned a home — either single-family (22%) or condo (17%). Among purchasers who were 45 years or older, about half previously had owned a single-family home and one-fourth had owned a condo.
- One-half of the buyers under 35 said they purchased a condo because they were setting up a new household, compared to one-third of all buyers and 10% of those who were 55 or older. Commuting distances and the need for more space or amenities were much less important factors.
- Younger people were more likely to have considered purchasing alternatives to a condo — 55% to 60% of those under 55 years old, compared to 40% of those in the 55+ age category. Thirty-seven percent of all condo buyers considered buying a single-family home and 15% considered buying a townhouse.
- The majority (61%) of the buyers looked at close-in suburbs and 41% of them purchased there. Slightly fewer (44%) looked at the outer suburbs, but only 28% found their condos in those areas. About one-third looked for condos in the inner city and less than 10% looked in rural areas. Only 19% purchased in the inner city and 5% purchased in rural areas. Younger people tended to look more often in an urban environment, but price was prohibitive, and only half of the people who looked in those locations ended up purchasing there.
- Eighteen percent of the condo buyers found their home in less than a month, 42% looked for one to three months, 22% for four to six months and 39% for four months or more.
- Forty-two percent looked at one to five units before making a decision to buy, 28% looked at six to 10 units and 23% looked at 11 or more units. Younger people shopped harder, with 25% of buyers under 45 years old looking at 10 or more units, compared to 13% of those who were 65 or older.
- Twenty-five percent bought a new unit, 14% bought a converted rental and 61% purchased an existing unit.
- People who previously owned a house and those who previously rented bought a condo in equal numbers across all building product types — low-rise, mid-rise, high-rise and townhouse. Mid- and high-rise buildings, however, were preferred by previous condo owners.
- Three-quarters of the purchases were in the suburbs — either close-in (46%) or further out (28%). The close-in suburbs were more attractive to all age groups; older people moved farther out’ and almost 20% bought in an inner city or downtown neighborhood.
- After price and location, important factors for deciding on a purchase were design and unit size (66%), the desirability of a particular neighborhood (64%) and good investment potential (57%). Less than 50% cited low condo fees, parking, pool and tennis courts, proximity to public transportation, porches and valet services.
- Eighty-eight percent said they were somewhat or fully satisfied with the quality of the soundproofing of their home. Older people were more likely to be fully satisfied; they were also likely to be in newer units and maybe can’t hear as well. Twelve percent were not at all satisfied, and dissatisfaction ran especially high among younger people in converted low-rise buildings.
- Reading down a list of amenities, 53% made their purchases in properties providing swimming pools and 72% of them use them; 46% had cable/satellite television and 88% use it. Twenty-seven percent of the properties provided a dog-walking area, which was used by 44% of buyers in these locations. Twenty-six percent offered a spa or health room, which was used by 64%; 26% provided broadband Internet access, used by 82%; and 5% provided a concierge, used by 71%.
For more information, e-mail Ann Marie Moriarty at NAHB, or call her at 800-368-5242 x8350.