More Home Buyers Turn to Condos : Housing: ‘Sticker shock’ on new-home prices turns attention of shoppers back to condos, the prices of which are starting to rise.

With fewer home buyers able to afford to pay the high prices of new San Diego County houses, budget-conscious buyers are increasingly turning their attention to the condominium market.

According to recent market data, San Diego County condominiums are posting healthy price rises this year. Year-to-year unit sales are down, but observers blame that on diminished inventory.

The condo market is benefitting from “sticker shock” experienced by new San Diego residents after seeing the county’s steep housing prices, industry observers say. Interest shown by the “move-up condominium buyer” is also contributing to the condo price increase.

“We’re beginning to see a new breed of home buyers,” said Gerald T. LaFlamme, managing partner of Kenneth Leventhal & Co., a public accounting firm that closely monitors the real estate market.

“About three years ago, somebody may have bought a condominium for $80,000 to $100,000 with plans to eventually buy a single-family, detached home,” LaFlamme said. “But, as (the buyer) looks around now, he’s finding himself priced out of the market.

“Nowadays, instead of buying a new home, the buyer is purchasing bigger and better condominiums,” LaFlamme said.

According to a recent survey conducted by Market Profiles, a San Diego-based research firm that tracks subdivision sales, the average price of attached housing, including town homes and condominiums, during the three months ended Sept. 30 was $170,553; up 18% from the $144,562 average price posted during the same period in 1988.

Although the number of new units sold during the third quarter of 1989 dropped to 816 from last year’s 1,381, the units sold figured as a percentage of available inventory has steadily increased in recent years, said Russell T. Valone, president of Market Profiles.

The percentage of available units sold through the third quarter of 1989 was 66%; up from 58% in 1988 and the 47% recorded in 1987.

Valone says family-oriented condominiums, rather than smaller apartment style units, should fare well in the coming years because it will be a less costly alternative to pricey, single-family detached homes.

Deborah Krivoshia, a Meyers Group consultant said: “New homes prices are leveling off, but I don’t think they’re going to go down. That’s why, at $150,000, condos are still a good deal. You can’t buy any kind of home for that price.”

During the three months ended Sept. 30, the median price of a new condominium was $153,950, up 29% from $118,900 during the same period in 1988.

“The condominium is becoming the only choice for a larger and larger cross-section of the home-buying public,” said LaFlamme of Kenneth Leventhal. “Condominiums are coming back into vogue again.

“They lost their appeal back in the 1960s,” LaFlamme said “It was new product at the time and single-family homes could still be bought at a reasonable price. In the 1970s, we had the inflation problem that made compact housing more of a necessity. If you remember, apartments were rapidly converted into condominiums. That created a oversupply, and prices came down. (Condominium prices) have been relatively flat ever since, but now they’re starting to increase again.”

Resale prices of condominiums are going up, too, LaFlamme said, though at a slower rate than those of single-family dwellings.

Comparing July median resale prices of the last three years, LaFlamme said the prices have increased from $100,600 to $112,500 to $120,000.

LaFlamme added: “Just between June and July of this year, the median resale price of condominiums went up from $115,000 to $120,000.”

Lack of available land and growth control measures should prevent overbuilding and a drop in condominium prices, observers say.

“It’s one of the better condominium markets in the United States,” said Sanford Goodkin, executive director of Pete Marwick Main & Co./Goodkin Real Estate Consulting Group. “With land prices continuing to inflate, there will be more condominiums. They have become a legitimate product in the marketplace.”