Buyers Home In on Condos : Affordability Helps Attached Units Win Back Favor in County’s Housing Market
Mike DeCair doesn’t need a real estate expert to tell him the facts of life: At 24, he simply doesn’t make enough money to stay in Orange County and buy a home that stands alone on a lot of its own.
So DeCair, like thousands of others, has lowered his expectations. He is trying to buy a condominium.
Earlier this month, DeCair, a roofer, spent a week camped in front of the sales office at a condominium development to buy a still-unbuilt unit for about $130,000. His willingness to spend a chilly week outdoors in Rancho Santa Margarita to buy a 1,000-square-foot home is testimony to the new-found strength of the Orange County condo market.
Condos, a term commonly used to describe all types of attached or common-wall housing, made a splash in the early 1970s, then nearly drowned in ignominy when soaring interest rates tore the bottom out of the real estate market a decade ago.
Today, sales agents who used to complain of ennui when assigned to a condo development in the early 1980s now boast of being as busy as their counterparts in detached-home sales--handling inquiries, showing properties and, in many cases, arranging and policing waiting lists and camp-outs for prospective buyers.
“This is definitely the hot area of the new home market,” said Linda Tibbett, sales manager for a condo development in south Orange County.
Even the resale condo market has taken off, with sales up more than 36% statewide in the past year and median sale prices up almost 10%.
“The dramatic improvement in California’s condominium market was an important part of the real estate story in 1988,” said Joel Singer, chief economist for the California Assn. of Realtors.
The market has been boosted in part by the design of the new generation of condos. While the first condos looked much like apartments, the new ones look more like houses inside. Upgraded amenities, such as vaulted ceilings, make condos more palatable to buyers who, from all available evidence, still prefer a detached home.
Evidence of the strong market for new condos that has developed in the county in recent years can be found in a number of price and sales activity surveys, including one by First American Title Insurance Co. in Santa Ana. That study shows that:
- The average price of a new unit has climbed nearly 40% in 5 years, compared with a 54% increase in the average price of a new detached home. And for condos, much of that appreciation has occurred in the past year, with the average price up 17% during 1988, contrasted with a 4% increase in 1984.
- New condominium developments in the county were selling units at an average rate of 1.7 a week in November, nearly matching the 1.8 weekly sales recorded at new detached-home developments the prior month. In late 1986, according to First American’s surveys, condo sales averaged 1.4 per week at each new development, trailing well behind the 1.9 weekly sales reported by detached-home projects.
- Developers are devoting more of their energies to construction of condos. The Meyers Group, a Chino real estate consulting group, said condos accounted for 42% of all new home sales in Orange County last year.
Donna Darby, a Cal State Fullerton student who is hoping to buy a new condo in Rancho Santa Margarita with her boyfriend, lays out the principal reason in one word: “affordability.”
“There is no way a young couple can start out in anything but a condo in Orange County,” she said. “Prices are just too high.”
The average new condominium in Orange County, according to recent surveys by First American Title, sells for less than half the price of the average detached home: $176,033 compared to $372,850. But the average condo in the surveys is also less than half the size--1,193 square feet compared to 2,496 square feet for a detached home.
On the basis of price per square foot, it seems that new condos are just about as expensive as single-family homes: $147 per square foot is the average right now, compared to $149 per square foot for detached homes, according to the First American surveys.
So what is the condo buyer getting?
Well, in the so-called affordable ranges of $250,000 and under, a lot less floor space, a postage-stamp deck, patio or back yard, maintenance-free exteriors, landscaping and access to a community swimming pool and clubhouse.
Builders say the main reason condos and detached homes cost about the same per square foot is that the core costs--including bathroom and kitchen fixtures and plumbing, appliances, water heaters, and heating and air-conditioning units--cost the same in both types of dwelling.
Land costs are similar too. The lots for detached dwellings have shrunk considerably in recent years and often are no bigger than a condo plot, said Peter Ochs, president of the Fieldstone Co., a Newport Beach builder.
The condos that Darby and DeCair signed up for last Saturday are starter units that are even smaller than the average.
The most expensive of the seven plans offered at the William Lyon Co. development was priced about $140,000 for a 1,100-square-foot unit with two bedrooms, two baths, a fireplace and a single-car garage. The least expensive unit, 563 square feet for $84,990, offered one bedroom, one bath and an open parking space.
Donna Darby’s preference is for a single-family detached residence with big rooms and a big yard. But she and boyfriend Kurt Muller want to stay in Orange County and have fallen in love with the Rancho Santa Margarita area. They can not afford to live there in anything but a condo, she said.
“We thought about going out to Sunnymead” in Riverside County, she said. “We have friends who bought a really nice three-bedroom home there for $75,000. But he works in Santa Ana and spends an hour and a half on the road each way, and they fight when he comes home because it’s late and he’s tired. We just didn’t think it was worth it.”
That desire by younger buyers to stay in the county--close to jobs and to the families and friends they grew up with--has helped the condo market tremendously in recent years.
At Vista del Flores, a 160-unit development near Lake Forest, most of the buyers are young singles and couples who grew up in south Orange County and chose condo living as a way to stay in the area, sales representative Mark Bacon said.
Buyers are also cheered and motivated by the renewed marketability of condos on the resale market.
Douglas Ward, a 24-year-old agent and condo specialist with RE/Max of Irvine, said his sales were well over $5 million in 1988. He said the early signs are that this year will be even better.
Singer, the Realtors association economist, said a survey of 33 market areas around the state showed that sales of condos on the resale market increased by 36.6% from 1987. The median sales price of a resale condo rose 9.3% from $112,280 in 1987 to $122,750 in 1988--the largest percentage increase in median price since the association began tracking condominium figures in 1982.
However, the appreciation meant that fewer Californians could afford to purchase the median-priced condominium. “With accelerating prices and a sharp reduction in inventory last year, this final bastion of housing affordability increasingly is threatened,” Singer said.
As strong as the condo resale market is, condos still sit on the market longer than detached homes.
“Condos are still the second choice for most people, but when they see the prices on all the detached homes, a lot of them come back and buy a condo,” Ward said.
That, said Randall, the Lyon Co. president, is why his firm, one of the nation’s biggest home builders, is stepping up its condo construction.
In 1983, he said, 80% of the homes Lyon built in Orange County were detached units and only 20% were condos. In 1988, the mix changed to 60% detached and 40% condo.
This year, Randall predicts that condos will account for 60% of Lyon’s Orange County product.
Other builders are also projecting sizable increases in their condo output in Orange County this year and in years to come.
At the Fieldstone Co., town homes accounted for only about 10% of the units built in Orange County in 1988, Ochs said. This year, he said, “it should be 15% to 20%.”
Fieldstone builds for the upper-middle-income buyer, said Ochs, so it does not yet see demand diminishing for its detached homes, which have tended to run from $150,000 to $225,000 in recent Orange County developments.
“As we continue to see higher and higher land prices in the county, we have got to see more of the market going to high-density development,” Ochs said.
And that means attached units.
COUNTY’S CONDOMINIUM MARKET IN PAST 5 YEARS
Price Avg Avg Avg Month/ Med Sale Avg Sale Avg per Number Number Units Year Price Price Sq Ft Sg Ft Bdrms Baths Avail 1/89 $141,900 $176,033 1,193 $147.55 1.9 1.9 1,073 6/88 146,990 169,154 1,321 128.05 2.3 2.1 1,047 1/88 120,990 150,563 1,303 115.55 2.1 2.0 2,646 6/87 122,990 146,202 1,341 109.02 2.2 2.1 4,610 12/86 119,995 153,667 1,275 120.52 2.2 2.2 1,797 7/86 126,200 141,580 1,315 107.67 2.3 2.2 1,301 1/86 123,900 136,211 1,330 102.41 2.3 2.2 2,499 7/85 117,990 134,409 1,292 104.03 2.3 2.1 2,893 1/85 114,990 131,094 1,256 104.37 2.2 2.1 2,719 8/84 110,995 127,234 1,195 106.47 2.1 2.0 2,810 1/84 107,000 126,030 1,219 103.39 2.1 2.0 2,471 % Change 32.6% 39.7% -2.1% 42.7% -9.5% -5% NA 1/84-1/89
Month/ Assn. Year Fee 1/89 $144.67 6/88 122.23 1/88 124.55 6/87 122.07 12/86 126.44 7/86 114.14 1/86 104.83 7/85 104.79 1/85 103.68 8/84 102.53 1/84 99.65 % Change 45.2% 1/84-1/89
Source: First American Title Insurance Co.
