Monday, April 28, 2008

Second-Home Buyers Go Condo

Vacation Houses Lose Out In a Weak Market; Coping With Pool Rules

The second-home market is in a slump. But one type of vacation property is still showing signs of life: condos (see Ballantyne Condos & Matthews Condos)

A new National Association of Realtors study estimates that sales of vacation homes in 2007 fell 31%, to 740,000, from 2006. But sales of condos dipped only slightly -- down 2.8% -- while sales of detached homes dropped 38%. The upshot is that condos cornered a substantially larger share of the vacation-home market last year: 29%, up from 21% in 2006.

Condos, including South Charlotte Condos, are selling better than single-family vacation houses for a number of reasons. They don't require their owners to maintain lawns, trim shrubs, paint the exteriors or replace roofs -- increasingly important concerns to an aging population. Condo communities also tend to offer amenities such as pools and clubhouses. And condos usually are cheaper to buy, and easier to resell, than houses.

Yet the prices of vacation condos haven't held up. Median prices fell almost 10% to $180,000 last year from the year before, while prices of single-family second homes remained flat, says the Realtor group. Part of that decline reflects the general downturn in the housing market, but the price pressure on condos also comes from investors who bought units in resort markets during the real-estate boom and now are trying to get rid of them. While the price-cutting is bad news for existing condo owners, it can make the units seem like relative bargains to buyers compared to houses.

Tod Phelps and his wife, Shelly, are among the second-home buyers attracted to condos. The couple since 2001 have owned a three-bedroom house on Beech Mountain, N.C., a 2½-hour drive from their primary home in Greensboro, N.C. But Mr. Phelps, an information-technology executive, says he is tired of spending weekends cleaning gutters and painting doors, and paying at least $3,000 a year to have people mow the lawn, weed flowerbeds and plow the drive in winter. "I didn't expect it to be as much trouble as it was," he says. Now the couple plan to sell the house and replace it with a "ski-in, ski-out" condo in the same community.

Condos are also making inroads in vacation spots where they've rarely been seen before, including beach villages along Lake Michigan. Some of these are attracting a new type of buyer used to an urban environment. Mary Morrissey, a government policy consultant in Chicago, and her husband recently bought a $350,000, two-bedroom loft at the Vineyards, a converted winery in Harbert, Mich. It features such downtown design elements as concrete fireplaces and window seats, exposed ductwork and soaring ceilings. The unit is much more open, light and fun than the usual cramped cottages found in the area, Ms. Morrissey says, and the contemporary style was the main reason they were attracted to it. "We never even thought about buying a single-family home," she says.

And in some places, such as Hawaii, prices have risen so high in recent years that condos are the only viable choice for many buyers. Maui broker Georgina Hunter says $1 million buys a two-bedroom condo in a resort with golf, pool and fitness center, but isn't enough for a single-family home. Since acquisition costs are so high, many buyers look to rent out their places when they're not vacationing there. Here condos also have the edge: Local zoning allows most condos to be rented for a short period, while most houses must be rented for at least 180 days. "You just get more bang for your buck," Ms. Hunter says.

But condos aren't popular in every second-home area. In New York's Hamptons, people prefer detached houses because they offer a yard, extra rooms and privacy -- "exactly what New Yorkers often lack in their primary residences," says Rick Hoffman, East End Regional vice president for the Corcoran Group brokers.

Condo living also can require an attitude adjustment as owners contend with close-by neighbors and live under a condo association's rules. Wayne Zawila, an Orlando, Fla., futures trader, paid $619,000 a little over a year ago for a three-bedroom weekend getaway in Daytona Beach, Fla. He thought the fourth-floor condo would be more secure and easier to manage than the Galena, Ill., lakefront house he used to own, which he once drove to at 3 a.m. because he was worried the pipes had frozen. But though condo life can be more carefree, at least when it comes to security and exterior maintenance, it's not rules-free. Mr. Zawila sometimes chafes under communal regulations he's never had to deal with before, like the one that bans him from smoking cigars while lounging in the pool. "It drives me nuts," he says.

Because many affluent second-home buyers like the common ownership and upkeep of exterior elements but still want a detached house, some builders are combining them in "condo homes." That setup attracted Sue Anne Davidson-Kalkus, a retired antiques dealer in Rome, Ga., and her husband, Tony, a retired Army colonel, who were married last year. A few months ago they listed her four-bedroom vacation retreat on 10 acres on Lookout Mountain, Ga., for $1 million and started searching for an easy-care vacation condo in the $600,000 range in New England, nearer to Mr. Kalkus's grown children. But after owning a custom-built place, Mrs. Davidson-Kalkus found the apartment-style condos she looked at to be "very ordinary." So the couple has just inked a deal to buy a detached, two-bedroom condo home at Winnapaug Cottages, a 35-acre development in Westerly, R.I. Their $300-a-month homeowner's fee covers landscaping, garbage collection, snow removal and exterior maintenance. "This is the best of both worlds," she says.

By: June Fletcher
April 18, 2008; WSJ

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