House Versus Condo

Condo
OR
HOUSE

“Air” Versus “Dirt”?

Today’s Challenging Real Estate Question:

Should I buy a single family home complete with the land and “dirt” it sits on OR should I buy a condo. A Condo is essentially having  “air” rights and sharing the “dirt” that the building sits on in a communal setting? 

“That is the Challenge!” which I have made the main topic of this article.

Clearwater Beach has limited land and is blessed with beautiful warm climate allowing for an outdoor lifestyle. Because of that, this seems like an ideal problem to solve with building up until you reach the sky. The option of owning a condo is for some a very viable, convenient and even preferable choice.  For others, because of the high cost of property in Clearwater Beach, it is the only option. We’ll look at both pricing ends of the market identifying the trends:




Is a House in Your Future?

Overview of Home vs Condo Market

In the last few years, prices for both homes and condos have continued to increase at a brisk pace with Clearwater Beach. With average home values reaching almost 2 times higher than the national US average (based on per square foot). 

  • The Main reason is that more people are retiring and deciding to move south and on the Beach. Since there is a fixed amount of beach properties the value of properties are beginning to be pushed up because of the shortage of good quality homes.
  • With new regulations and harder to meet building standards, current property will become a rare and valuable product.
  • Finally, people are discovering Clearwater Beach. According to TripAdvisor, Clearwater Beach is The Best Beach on the mainland for the third year in a row. Based on this it is likely that the visitor growth will continue to bring people to our beaches and some of those will lead to people that want to live on Clearwater Beach.
  • Basically demand outstripping supply.

In the Median Home and Condo market, more often than not for Clearwater Beach is what is viable and affordable. In the higher priced market, it becomes what is available. 

Luxury Home vs Condo Market 

Interestingly and ironically it is the buyers in this group which have really pushed the pendulum in the direction towards luxury homes after years of luxury condos being built. Why? Because if anyone could afford to buy a big plot of “dirt” in Clearwater Beach, it would be this group.

While the convenience, new condominium projects such as Sandpearl Residences and Bell Harbor, to just mention two with units in over $700k were getting snapped up while homes in the traditional luxury home areas were experiencing 16 months of inventory (homes over $750k). Obviously much of the demand for Clearwater Beach Luxury Vacation Condos are from wealthy buyers who like the convenience of simply locking the door and walking away for a few months, free of any maintenance worries.

Undoubtedly many primary residences (as opposed to vacation homes) did migrate from Luxury Homes to Luxury Condos too. Not as many as you would expect. 

Will this be the end of
Luxury Homes?

No; Not by a Long Shot.

Interesting enough, the luxury condo market is leveling off and more people are beginning to look at the houses again.
I firmly predict that the pendulum has begun to swing back to owning a real plot of “dirt” for some interesting and compelling reasons:

  • Prices and Costs of Condos have risen sharply. With no new condo projects set in the near future, As the inventory of luxury condos starts to dry up, attention will revert back to the traditional luxury home neighborhoods.
  • Home ownership can provide a lower cost of ownership than a Condo. All the homeowner associations in the North Beach sections (less Mandalay Point) are optional and run $50 – $150 annually. Compare that to a Condo Association costing $1,000 a month or more.
  • Homes are getting much smarter with better materials, easier to maintain gardens, computerized lights, acoustics and appliances requiring less and less time for the owners to take care of and maintain them
  • However, I think one of the 

What is the Maintenance Fee of a Home?

There will be a growing trend for homes listed on the MLS to include an approximate monthly “maintenance fee” so as to make them more competitively compared to condos.  Luxury homes with light bulbs numbering in the 100s and almost as many manual switches will make way for smart systems with automated LEDs all controllable from an iPad. Music will automatically wake you in the morning and your cup of coffee will be ready-made when you walk in the kitchen. We will witness high productivity gains in maintaining and living in a large home in the not too distant future.

Based on all the above, for some people the almost maintenance-free lifestyle a condo provides will always be the choice.  At the median level in Clearwater Beach, buying a condo may be the only option. And for others, home will always mean living in a single family dwelling and owning their own plot of “dirt.” However, for a large and growing % of people, perhaps as many as 1/3, either condo or home living could both be viable options. The pendulum, especially for Luxury Home/Condo buyers could swing back to homes as they become smarter and easier to maintain.

Final Words

The Takeaway

Given the above demand and supply environment, one does not need a crystal ball to see prices for both homes and condos for sale in Clearwater Beach continuing to increase in the foreseeable future.   Therefore, the time to buy is now with interest rates still close to historically low levels.

[i] 03/17/2017 – Hawaii Real Estate: Air vs Dirt – Lifetime Investment Challenge | Great Value Luxury Properties | Investor Guide | Open House Info & More | Damon Rhys

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