Not long ago this question would have seemed ludicrous. Just a few years ago, a large number of Madison condo developments were holding onto a very large number of unsold units. Demand was low. Many consumers were wary of buying into the condo market and were opting to rent instead. In some areas, such as in Downtown Madison, there were over two years of supply sitting on the open market along with a large amount of shadow inventory lurking behind the scenes. And so condo prices fell, and they kept falling, until they bottomed out in 2012.
That's when we began to see big changes in the condo market. Suddenly for many consumers it was cheaper to buy than it was to rent. Condo purchase activity picked up considerably in 2012 and then moved much higher in 2013 and 2014. Condo prices have now been rising for the last two years.
How Times Have Changed
Now we have a market with a limited supply of condos. Almost every condo development in town is now either sold out or close to being sold out. In fact, the inventory numbers are startlingly low.
For example, as of this post, the Madison condo market has only 3.9 months of inventory.
The downtown market has only 2.8 months of supply.
And the city of Fitchburg has only 1.9 months of inventory.
Helping Condo Buyers when Supply is Tight
For some buyers, finding the right condominium in the right location can be challenging, so we're using a number of different strategies to identify properties which aren't listed on the open market. These include writing and calling condo owners directly, contacting condo association managers, and door-knocking in targeted condo developments. Is this the new normal for Madison condo buyers? We're using these tactics more and more in condo developments where supply is especially tight.
Looking Ahead to 2015
We expect 2015 to be another year of tight supply and rising prices, as all signs point to another year of strong demand. For example: We receive several inquiries each week from people who are looking to stop paying rent and start paying a mortgage. We're working with a large number of buyers who are ready to downsize as soon as they find the right condo for their needs. We're also observing a large number of Epic Systems employees who are buying condominiums all over town, especially in the Downtown area.
So, Does Madison Need More Condos?
The Madison area is ready for more thoughtfully-planned condominium developments. The demand is there and waiting. We don't need to flood the market with thousands of units all at once (which we've already been through), but adding a few hundred units a year would be a healthy way to meet the pent-up demand that's out there.
Dan Miller, REALTOR
Mad City Dream Homes & RE/MAX Preferred