The Causes of Condo Mania

It was hard to miss The Oregonian’s front-page story this morning by Dylan Rivera about South Waterfront condo tower The John Ross. According to the article, 80 percent of the 286 units have been reserved in its first six days of availability.

I was particularly intrigued by Rivera’s concluding few paragraphs. “Wherever the buyers come from,” he wrote, “surging condo sales are prompting developers to bring more buildings to the market.”

Wherever? I think we ought to have a deeper understanding of the source of these buyers. One can easily speculate they’re coming from the suburbs or California, for example. But is that really the case? I’d like to hear from some people who really understand the demographic shift that’s happening here in Portland and, to some extent, the entire nation.

This afternoon I spoke with Rivera, who made a key additional point: "Because of the relatively low price point--nearly half of the units were under about $325,000--that enabled a lot of relatively young buyers under 40 to get into the building. Whereas a lot of the units in The Pearl or elsewhere have been Baby Boomer-oriented."

The last paragraph in Rivera’s piece quoted real estate consultant Eric Hovee saying, “The notion of building more complete communities is starting to filter its way to the rest of the region.”

So is that it? Is the popularity of close-in condos due to the fact that buyers feel part of a community, that they feel less isolated from their neighbors than in single-family homes? Certainly many condo residents feel that way, but I’m not sure if that is the smoking gun, so to speak, the primary impetus behind this trend.

Comments

[Brandon]

One primary impetus behind the condo trend is $$ I'm sure there are several investors disguised as home buyers willing to live in the John Ross. I know there's a contract but there's also a way around that. The secret is out on how easy it is to flip a condo and make a huge profit without doing a thing.

[Brian]

I think flipping is a factor, but I don't think it's THE factor. That kind of demand points to a deeper demographic and geographic shift. That's what I want to get to the bottom of.

[fron]

friend of mine just bought one
educated, married, no kids, one pet.
Currently owns a house and hates yard work, house problems ect.
formulation = young educated americans dont want kids and the hassles of owning a house. rather spend money on travel ect.
now you do the math

[Chris Smith]

Does anyone else think this accelerated velocity of purchases looks an awful lot like the behavior you see in a bubble?

I believe in the fundamentals of our real estate market here in Portland, but still, this seems crazy.

[Kai Jones]

A man's home is his castle...I think there has been a sea change away from the middle-class proof of success being a single-family dwelling, and away from the limited involvement in home life of yard work and grilling. My husband hates yard work, and we've talked about selling our house and buying a condo--no yard work, somebody else takes care of routine maintenance, etc.

[Brandon]

The deeper demographic and geographic shift is that people in the US are realizing bigger isn't always better. Bigger homes and owning many possessions require time to maintain. Also, living in the burbs requires more time to drive around to get to amenities or work. So, people are downsizing and moving closer to amenities so they have more free time!

[brett]

my two cents: while i agree with the sentiment that it is younger no kid types of people moving into the "vibrant" city, i do have to take issue with the downsizing argument. i agree, my 2000 sq. ft. house is way to big for the two of us, but according to census records, housing accross the land is growing immensly. average house sizes are above 2500sq ft. been to the west hills lately to see the mcmansions.
i agree with the author, i think there's something else at play here because there are a few to many conflicts.

[cab]

Id add the driving issue into this. Many people are just sick of driving to anything and everything. Its not like most Americans had a choice of lifestyle until reciently. Our cities haven't been that safe or nice for sometime. The idea that one can live in a safe, nice dense neigborhood with many amenities in walking distance is a new option. I think the desire for this has been there all along, but no one was building the places.

[Chris]

>>I believe in the fundamentals of our real estate market here in Portland<<

That's straight bubble-talk.

The far more interesting article today was the one on infill.

http://www.oregonlive.com/portland/oregonian/index.ssf?/base/portland_news/1121940068320850.xml&coll=7

"Several areas east of 82nd Avenue are targeted for wholesale conversions from neighborhoods of single-family houses to apartment and town house hollows."

Evidently Portland has enough condos. Bring on the townhomes and the renters.

[Ray]

Portland should get someone hired for the parts of town not being looked at for Planning Codes/Minimum Standards or get some continuous improvements going to free up some time for the staff they already have.

Higher density along the major east/west boulevards and on the big x2 Avenues, plus near transit centers or MAX stops (been to 172nd and Burnside lately? Two corners have four story developments) is our future.

Why can't Portland and Gresham agree on some Standards and make sure that; where the two cities meet (172nd mostly) we don't have a obvious line of destinction; and do it quickly.

Ray Whitford

[Justin]

cab: you HAVE heard about Portland's international skinny-lot design competition to come up with plans for better infill development, right?

http://www.livingsmartpdx.com/default.asp

The goal was to come up with better designs to help shake complacent developers out of their boots and provide them with actual plans that they could build with. I don't know if they plans are available yet - they may still refining their final plans.

However, they got 426 designs submitted from around the world, including some pretty sensitive designs towards existing architecture.

Obviously, there is still a lot of ugly infill that should never have been built and still needs to be addressed.

[Brian]

I am actually hoping to write a post soon that's an update of the Living Smart competition. They were going to make some of the winning plans available to developers not only free, but pre-approved by the Planning Bureau. So I want to find out if that has translated yet into any of the winning skinny-lot homes built (which I doubt at this early stage) or at least planned to be built.

[Mr. Big]

Harkening back to the original thread about condos and trying to divine the trend in demographics -- perhaps younger people are opting for less worry, less hassle and more convenience. Population density is a good thing and offers all sorts of options for services and interesting locally owned businesses. But as someone who felt that same way as as lucky condo owner in Bel Aire as young college kid, I witnessed the downside of a market crash. 10 years later, we lost 100K when we finally sold after holding it for a decade. new models, changes in amenities and design / features leaves these habitances more open to the fluctuations of fad. While I can buy a "tear down" and remodel a traditional home, condos with their constraints and regulations afford owners far less customization leeway. New appliances go only so far. Give me land, land glorious land. Not having people above and below, elevators, neighbors blocking your car when you need to get to the airport (it happened to me) was enough to sacrifice the convenience for a sense of persistence.

[Kevin]

I really like the comments that Brian left. While living the lock and leave lifestyle is appealing I don't think we are looking at a fundamental shift to condos. I believe they are a fad. A fad that will likely continue to grow as the baby boomers leave the burbs...but fast forward 10 years and it's very likely that we'll see the bright lights of condo living fade. Just wait till owners get fed up with HOA fees and restrictions. I don't love yard work but more and more homes are being built with low maintanence yards. Buy a SFH like this and at least you'll benefit in the long term by really owning the land. Land is king, always has been!