The condo boom is real, according to real estate agents and investors who say it is fueled by a combination of high demand, rising home prices and low interest rates.
The surge in the number of condo units has created an oversupply that could result in higher prices, said Scott DeFife, president of the National Association of Realtors, which represents more than 500 local real estate companies.
“You have to get to a certain point to have any chance of seeing that, and it’s happening at the moment,” he said.
He said the condo boom has a long history, going back decades, and that it has only gotten worse since the housing crash of 2007-2008.
With home prices on the rise, developers are building bigger, more expensive condos and many are selling their existing units at a discount, he said, citing data from Zillow, which tracks sales.
The condo boom in recent years has sparked an investor backlash against those who have bought condos at a lower price than the homes they are selling, with some arguing they should be treated like stocks.
The latest signs that the condo market is on the brink of a crash are coming from a variety of sources.
Condo sales are down almost 70% from a year ago, according the U.S. Census Bureau, and the number is down by a similar amount in most of Canada and the United Kingdom.
Many investors are turning to investment vehicles such as stocks and bonds to make a profit, said David Rittman, chief executive of the Chicago-based Rittmans Real Estate Partners.
Investors also are shifting their focus from buying homes to renting.
But while many investors are making profits, many others are losing money, and they are paying more for their homes, Rittmans said.
The market has a lot of volatility in the last few years, but it is not the same as 2007, when the market was going through a bubble.
When we see a lot more of this sort of thing happening in the future, it’s going to be really hard to stabilize the market, he added.
While the market is struggling, there are some signs that it could get a boost, said Ritts, who said he expects the number to rise this year and stay at that level for the foreseeable future.