During the robust markets we experienced in the 1990s, price increases for condos and townhomes closely tracked price increases for similar sized single family houses. While one property type often increased more than the other in a given year, that typically balanced out within the next year or two. This made sense, because the two markets substantially overlap, with many buyers looking at both small condos and small single family homes during their home search.
As the rental market weakened in 2002, however, prices of condos and townhomes in the communities we cover tended to flatten out, while the prices of small homes continued to increase modestly year on year. Then, during the 2008-2011 recession, condo/townhome prices tended to drop slightly, while small homes tended to retain their value.
As a net effect of all this, was that the price gap between comparably sized condos/townhomes and small houses began to expand, beginning in some communities in 2001 and 2002 and becoming widespread by 2003 and 2004. As illustrated in the chart below, condo/townhome prices in Lafayette were 80% of small home prices in 2002, but they’d dropped to about 72% of small home prices by 2010. For Louisville, they shift over the same time frame was from 74% to 60% of small home prices, for Gunbarrel, from 60% to 50%, and for Boulder, from 70% to 58%. While the prices of condos and townhomes generally didn’t fall in any of these communities, even during the recession, owners of these properties lost about 10% when compared to owners of comparably sized single family homes. It looked like the owners of single family homes had made the better investment.
Shift focus top the past couple of years, however, and it looks like this gap is beginning to move back to where it was in the 1990s. In Lafayette, condo/townhome prices rose from 65% of the median single family home price in 2013 to 72% of that price in June of 2016. In Gunbarrel, the ratio shifted from a low of 47% in 2013 to 61% in 2016. In Boulder, it shifted from 58% in 2013 to 66% in 2016. Among these communities, it’s only in Louisville that we don’t yet see this ratio narrowing back toward its 1990s levels.