The condominium market, once touted as the golden girl of the real estate industry, is losing some of its luster across the country, particularly in the inner cities. Young adults, considered the backbone of the city condo market by many developers, are moving to the suburbs and fewer buyers are interested in the apartments they leave behind, say demographers.
"Condos were built, to a large extent, to serve as first homes for young couples who hadn't gotten around to having kids," said William C. Apgar Jr. of the Harvard-Massachusetts Institute of Technology Joint Center for Housing Studies. "Twenty years ago they would have bought a starter home in the suburbs" but could not afford them in recent years. "Now they are getting ready to move on."
The District of Columbia condo market is healthier than many, chiefly because its traditional mainstays are single, in-town, highly paid Yuppies whose numbers here have remained consistently high, attracted by the federal bureaucracy and spinoff industries such as law and lobbying, said David R. Mayhood, whose company specializes in condominium sales.
The Washington metropolitan area has the highest percentage of single people in its population -- 32.5 percent -- among 14 major U.S. cities surveyed in 1980 by the Greater Washington Research Center. Although government agencies have shrunk in the last five years, the number of single men and women in Washington is still high, Mayhood believes.
Washington also has its share of young adults who are having children now and are heading for the suburbs. If they own two- or three-bedroom condos in the city, they will not have any trouble selling them to affluent city lovers, according to G.V. (Mike) Brenneman Jr., whose company sells, leases and manages condominiums. If, however, they are leaving efficiency and one-bedroom condos in modest buildings, they are having trouble finding buyers, he said.
In other American cities the condominium markets are showing signs of decline, and some housing experts believe the reasons go beyond the aging of the baby boom generation whose members are ready to raise their families in the suburbs. It is becoming increasingly clear that many Americans regard condominiums as places to live until they can afford a single family house, they say.
"Every survey we have seen indicates the American dream house is still a free-standing house, with a hunk of lawn in front and in back, and a two-car garage," said George Sternlieb, director of the Rutgers Center for Urban Policy Research.
He cited a national study of condominium conversions made by the Department of Housing and Urban Development in which 80 percent of the respondents viewed the condos they had bought as temporary homes. They hoped to eventually move into a one-family house, he said.
Families everywhere who move out of condominiums "are looking for a sense of privacy, a sense of separateness from the neighbors," Apgar notes. Falling interest rates in recent months have been an additional boost for condo dwellers who want to move to suburban neighborhoods where they can have "a little bit of grass, a little better school system, a little yard," he added.
The movement of young families to the suburbs is expected to have a major impact on inner city condominium markets in many parts of the country, where there are fewer young, first-time buyers following them and older "empty nesters" are showing a preference for staying in their single-family homes, even after their children leave home.
A dramatic drop in the birth rate that began in the mid-1960s will be felt in about five years, when the number of first-time home buyers, a market condominium developers have come to count on, will fall off, according to Apgar.
Many developers were hoping some of the young families now heading for the suburbs would be replaced in the city condos by "empty nesters," older couples whose children have left home and who are nearing retirement. This hope may turn out to be unrealistic.
The majority of empty nesters don't want to move, Apgar said. "They like their single-family homes. If you ask them, they say they're happy as clams." He also questioned whether many older couples will choose "the kind of urban life style" that attracted young singles. Usually, the "empty nester types prefer a more peaceful neighborhood."
When Apgar's polltakers talked with older couples, "they were busy throwing the kids' furniture away, and opening up dens and offices. . . . They were very content with their housing. They weren't doing a lot of remodeling but were doing things like fixing the roof, the heating and the plumbing to keep the house workable."
If there is renewed growth in the condominium market at some time in the future, however, it will be fueled by older people, he said. A change could come as a result of people who retire early, with the resources and energy to own both retirement and vacation homes. In many instances, they would be likely to choose condominiums.
Although painting a gloomy future for condominiums, Apgar said he is "not talking a collapse" in the market. "It just won't grow. . . . s "A lot of people had visions of making a fortune on their condos and they won't . . . They will have to rent for lack of a real good sales price."
"I think the real impact" of the declining demand for condominiums will be on development in the future, Apgar said. "It's going to show up in condo conversions." He believes there will be more demand for rental units and less for condominiums in coming years.
Much of the multifamily housing under construction now is being built for rental, Apgar said. The National Association of Home Builders reported recently that 33 percent of the multifamily units built in 1983 were condominiums and cooperatives, down from 35 percent in 1982.
Recent surveys of builders and homebuyers also indicate a developer pessimism and a weakening condo market. Developers expect brisk sales of single family homes in the next six months but about half predict poor sales in condominiums, according to an NAHB poll of its members. The National Association of Realtors study of repeat buyers reported 55 percent of apartment condominium dwellers chose single-family houses for their next homes. Only 20 percent wanted to move to another apartment condo.
In the District of Columbia, high costs and local laws that often make condominium conversions difficult and time consuming, have combined to keep the supply of condos fairly low in relation to the demand for them, said some local sources. The tenants of a rental building may vote, in a secret ballot, on a proposal to convert the structure to condominiums. If the vote against the plan, the owner may not carry it out, and must wait a year before asking for another vote, said a city housing official.
The official, who works in the condo conversions office, could not provide a list of conversion certificates issued in recent years because he did not have time to count them, he said. Mayhood said he believes few, if any, conversions have been initiated since 1983 and only a handful of new projects are under construction.
Condo sales prices in Washington have mimicked a roller coaster in the last decade, according to Mayhood. Prices shot up to as much as $150 to $175 per square foot in some areas of the city in the late 1970s, dropped back down in the recession of the early 1980s and now have crept up again to around $140 per square foot, he said. To keep condominiums affordable as costs rose developers reduced the size of units until "our market is seen as state of the art on scaled down design," he said.
A Wisconsin Avenue building just now being completed sold 45 of its 79 units before it was finished, considered a "very good" record, said Mayhood. Its cost is about $135 per square foot, which puts a $100,000-price tag on a one-bedroom apartment. To bring the apartments into this price range, the developer scaled them down in size to "a very efficient design, with open kitchens, and a minimum of hallway," he said.
While prices were rising rapidly five or six years ago, "young buyers in their 20s bought anything in sight. They were driven to buy by the fear of inflation, and real estate prices were cocktail party conversation."
Those who purchased efficiency and small, one-bedroom condos in droves now encounter difficulty in resales, especially with efficiencies," said Brenneman. The majority who are trying to sell their condos are couples who want to move to a bigger place -- usually a single-family home in the city or the suburbs -- because they are ready to start their families, he said.