Focus On Condos

OK, you're off the hook - I'll spare you the price per square foot carnage this week. I'm still trying to figure it out. Well, actually, I'm trying to make time to figure it out...

So this week, let's talk about our condo market. This can be kind of a hard thing to get your arms around, because we lump a lot of things into the Single Family Attached (SFA) category in our MLS. This is a designation made for homes that share a wall or walls with other units. This includes everything from sub-$100,000 Cypress Woods condos up to Country Club cluster homes in the $300,000s. Some of the units in that category aren't technically "condos" - some of them own a patch of land and the owners do their own building maintenance.

Instead of going into the whole technical discussion of what a condo is or isn't, I'll tell you how I track them here. It's pretty simple - I look for SFA units that aren't in the Country Club. The only reason that I throw those out is because one or two of those can really skew the numbers. They tend to be a lot more expensive than the rest of the SFA units, and really, they're kind of their own little micro-market. The rest of the SFA units in town - even though they have different characteristics and price points - all tend to track similarly in how market forces affect them.

For the first half of last year, the market for condos in our market was, to put it mildly, sluggish. Through the end of June, we had sold a whopping 16 condos in the Lompoc Valley. While overall sales for that period were up 28.3%, condo sales were down 11.1% for the same period in the previous year. Part of what was going on had to do with the screaming deals that were available on houses. The price spread between the two was just not enough to make entry level buyers opt for a condo most of the time.

The second half of 2008 was a different picture. Overall sales for July through December nearly doubled from the same period in 2007 (95.5% increase). Condo sales for the same period increased 258.3% over 2007.

Two hundred fifty eight point three percent increase. Holy &$#@!

Now mind you, the last half of 2007 was just a horrible time in our market in terms of activity. We had months where the number of sold units in the entire valley was in the teens. Honestly, I'd like to just repress most of the memories I have from that period. So what happened? Why did condos increase in volume so much more than the market as a whole in the last half of 2008?

Well, like everything else in this market, it comes down to price. At the beginning of 2008, a 3 bedroom 2 bath Lompoc Village condo (a pretty good benchmark for this) was going somewhere in the low 200's. At the end of the year, one of those could be picked up in the 120's. That's nuts. During a period when values dropped something like 27% across he board, condos were dropping closer to 40% of their value. And when that happened, the spread between condos and entry level houses got big enough to make them a viable option again. Now, well priced condos move just as fast as well priced houses, and aggressively priced ones almost always have multiple offers.

It'll be interesting to compare this segment of the market to the market as a whole as we move forward. When we start to see our values stabilize and recover, will condos lag, or will they keep pace with the rest of the market? I'll revisit this in a few months.