The end of the condo craze is leaving real estate developers looking for other options.
Developers in the Washington area are dumping their proposals to build condominiums and switching to apartments as a glut of new and old condos slows sales.
In the latest move, a project in Takoma Park originally designed as condominiums, then canceled, is being reborn as an apartment complex.
Home builder Centex Homes started selling condo units for its Pavilions at Takoma in November, beginning in the low $200,000s for studios one block from the Takoma Park Metro station.
Last month, Centex Homes suddenly canceled the condo project, citing unfavorable market conditions.
The company sold the partially completed project Feb. 14 to Gables Residential, a McLean real estate investment trust.
“I guess the condo market got a little bit saturated,” said Ronny Salameh, Centex Homes’ division manager for Maryland and the District. “Until all that inventory goes away, it really slows down the condo market. It opens up for the rental market.”
When the housing boom peaked in 2005, condominiums made up 50 percent of the 354,000 new housing units being built nationally, up from 20 percent two years earlier, according to the National Association of Home Builders. This year, the association says condos will make up about 30 percent of new housing units.
Condominiums still are selling in the Washington area, but they are being bought by people who plan to use them as their primary residences instead of investment properties that offer a quick buck when they are re-sold a few years later.
“People are buying them for the correct reason today,” said Grant Montgomery, vice president of real estate research firm Delta Associates. “They’re a home first and an investment second. During the craze, I think that was inverted.”
The median price of condos rose 57 percent nationwide between 2001 and 2004, according to the National Association of Realtors. Single-family homes rose 25 percent in value in the same period.
In 2004, 13,557 apartments were converted to condos in the Washington area, Delta Associates reported. Last year, no apartments were switched to condos.
Last year, condo resale prices fell 6.1 percent in the District and remained generally flat in the Washington region, according to Delta Associates. One year earlier, condo prices in the Washington area rose 24.5 percent.
The 65,000 new jobs created each year in the Washington area make apartments an attractive alternative for residents while home prices remain out of reach for many of them.
Apartment rents rose 4.7 percent last year regionally on strong demand from new residents and homeowners.
Zom Mid-Atlantic bought the property rights for a condo project at Irving Street and Wilson Boulevard in Clarendon from developer Faison and is turning it into a 185-unit apartment complex. Zom Mid-Atlantic paid $17.2 million for the project in a deal that closed Dec. 21. The company expects to spend $100 million to complete the apartments.
In 2005, Monument Realty planned to convert the 574-unit Park Center apartments in Alexandria into condominiums but switched back to apartments in May.
“The apartment market has strengthened significantly, which made it an easier decision to keep the building as an apartment building,” said F. Russell Hines, Monument Realty’s executive vice president.
Developers of the View 14 housing project being built at 14th Street and Florida Avenue Northwest originally designed the residences as condos until the condominium market slumped. In December, Level 2 Development said the 183-unit building would be used for apartments.
Steve Schwat, senior vice president of real estate developer Zom Mid-Atlantic, said high construction costs are contributing to developers’ decisions to build apartments instead of condos.
Steel prices rose 26 percent in the past five years and concrete materials rose 29 percent, according to the National Association of Home Builders.
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