It's not just that condos are comparatively cheaper and relatively more easy to maintain than a single-family home.
In recent years, they've become the prime residential real estate investment and the best may be yet to come.
Since 1996, condo prices have risen 23 percent, at an annual rate of 5.1 percent compared to new homes rising 21 percent since 1996 or 4.8 percent a year and resale homes rising 20 percent since 1996 or 4.7 percent a year, according to the National Association of Realtors.
The median price for existing condos was $122,600 for 2001, up 9.7 percent from $111,800 in 2000. During the fourth quarter, the typical condo price was $125,000, 9.8 percent higher than the same quarter in 2000, NAR said. By comparison, the median-priced existing single-family home was $148,000 in the fourth quarter.
"Due to the lower cost, lower risk nature of the condominium market, condos are far more insulated from economic declines than most other markets," said Kevin J. Thorpe, an NAR research economist who penned "Going Condo: The Prime Real Estate Investment of 2001" for the December, 2001 issue of NAR's Real Estate Outlook magazine.
Despite the return on your money, condos aren't for every home buyer.
Condominiums (Latin for "common ownership" or "common control"), town homes and even some zero-lot, single-family developments, typically are built in higher densities than traditional single-family homes with lots. If you don't like living close to your neighbors, you may not want a condo.
Also condo and townhome housing is often constructed as what's called "common interest developments" (CIDs) -- you own everything in your unit on your side of the walls. As a mandatory dues-paying member of the governing homeowners association, you are a shareholder in the remainder of the buildings, grounds and other facilities, which are maintained by the association. You might like the idea that you won't have to maintain the landscaping or perform maintenance outside of your unit.
There are also planned unit developments (PUDs), often townhomes or zero- to small-lot homes that allow you to own the patch of land beneath your unit, in which case you may have to perform maintenance and upkeep of your structure and grounds, but not the common areas.
Condo home not your castle
The decisions about running the development and the budget are based on reams of rules, regulations and other operating guidelines not unlike those used to regulate a business. Those rules may prevent you from doing some things you can do if you own a single-family home.
For instance, while federal law mandates the HOA to permit you to have a satellite TV dish within the boundaries of your unit, the dish may not be in position to receive the signal and the association may prohibit you from putting the dish on the roof or other common area where the dish could receive the signal. You likely also will have rules regarding pets, parking and home improvements you won't face if you own a single-family home.
Enforcing the rules you must follow is left to the homeowners association's board of directors, elected home owners who can make or break the "business" or you if you don't like they way they enforce the rules.
Sacramento, CA-based condo activist, Frederick L. Pilot has said buying a condo is much like buying a share in a closely held, publicly-traded real estate holding company run by inexperienced volunteers. However, many associations hire professional management companies to keep them financially solvent.
"It is amazing that people don't spend much more time on a condo purchase, when they are becoming 'business partners' with strangers in a multi-million dollar real estate development partnership," said Robert M. Nordlund, president of Association Reserves, a Calabasas, CA-based firm that studies home owner association reserves in 43 states.
Nordlund says because of the complex nature of the special kind of home ownership, it is often a good idea to have an aptitude for minute details or be willing to hire an attorney to pour over the association's governing documents and other materials to get to know your new HOA-operated home and to determine if it's the kind of housing you can live with.
Chances are, you won't have a problem selling your investment.
Condo selling like hotcakes
Sales of existing condominiums and cooperatives set a sixth consecutive annual record in 2001, even after sales eased in the fourth quarter from an all-time high in the third quarter, according to NAR.
Condo resales totaled 738,000 in 2001, up 3.8 percent from the previous record of 711,000 sales recorded in 2000.
The seasonally adjusted annual rate for existing condo and co-op sales was 717,000 units in the fourth quarter of 2001, down 8.0 percent from a record 779,000-unit rate in third quarter. Sales activity in the fourth quarter was 0.6 percent below the 721,000-unit sales level during the same period 2000; even so, it was the sixth highest on record.
Sales were toughest in the West where they slipped 2.5 percent in 2001, but fourth quarter median prices were highest in the West at $146,000, up 6.2 percent from a year earlier. The South revealed a 14.5 percent fourth quarter price gain, the highest quarterly gain in the nation.
All regions, except the West, saw year-long sales increases with the Midwest showing the greatest annual sales gain at 7.3 percent.
"Surprisingly, the condominium market has not yet reached its zenith, as evidenced by the stellar year it is having in 2001," said NAR's Thorpe.
"Favorable demographics paint a nice long-term picture...The echo boomers represent the next big wave of potential home owners...as baby-boomers and the parents of baby-boomers get older, there predilection may shift to lower maintenance homes, adding another source of demand for condominiums," Thorpe added.