AS THEIR CHILDREN MOVE OUT OF THE family home, many baby boomers are leaving the nest as well. People 45 years and older account for 42 percent of the nation's condominium buyers, according to the National Association of Realtors (NAR).
They're in good company. The growing group of first-time home buyers comprises 49 percent of condo sales. Echo boomers—the baby boomers' children, born between 1975 and 1985—are about to enter prime time for buying first homes.
The condo market got hot about three years ago as empty-nesters began their migration, and the demographic trends suggest it will stay steamy. The median sales price of existing condos and co-ops rose to $173,300 in 2004's first quarter, marking a 14.5 percent year-over-year jump. Those numbers look even better next to the first quarter statistics for single-family homes: The median sales price was $170,800, up 6.5 percent from a year earlier.
Economists note that increasing sales of new, high-end condos geared toward baby boomers—many selling for more than $300,000—skew the median sales price for condos higher, as do sales in more expensive urban areas. First-time home buyers in those markets look for more affordable condos with fewer bells and whistles, and data indicate there won't be enough to meet demand.
The NAR says the average age of a first-time buyer is 32, putting echo boomers just three years away from that threshold. And Harvard University's Joint Center for Housing Studies estimates that new household growth between 2005 and 2015 will be about 10 percent higher than previously projected.
Immigration accounts for some of that growth. The Joint Center reports that more than half of the country's immigrants settle in 10 “gateway markets,” some of the country's most expensive housing areas. “Their economic power constrains them and directs them toward condos,” says Zhu Xiao Di, a Joint Center research analyst.
Builders are responding to the demand from both ends of the market. Starts for new condos rose in 2002 and 2003, and condos' market share is up: They comprised 12.8 percent of sales in 2003 compared to 9.6 percent a decade earlier.
There's little fear the condo boom will bust, but economists say appreciation may moderate as mortgage rates rise. Building is more restrained than it was when an oversupply led to a market collapse in the early '80s, says Michael Carliner, an NAHB economist. Now, “it's not a question of a glut,” he says. “Community facilities and maintenance [will] become increasingly popular.”