Dear Toby: Why are condo prices per SF higher than those of homes?

A reader asks. Toby replies.

Palm Coast, FL – September 16, 2009 – A reader recently emailed me, "Toby, how about writing an article discussing the pricing of homes vs. condo’s. It seems strange to me that condos carry such a high value compared to single family homes. Considering SF, land values, maintenance costs, etc., buying a condo does not seem logical yet the prices are "always" higher based on SF." JC

Toby Says:

Your question raises a good point. You will often hear Realtors® talk about comps (comparable prices) when they discuss the market value of a property. It doesn’t make sense to compare the price of a 2,000 square foot condo with an ocean view to the price of a 2,000 square foot home in Lehigh Woods (apples vs. oranges).
Palm Coast and Flagler County’s real estate market is segmented. The bulk of residential home sales fall into the "under $200 thousand" segment. At least half of those sales are "distressed" (bank owned via foreclosure or short sales).
The condo market, on the other hand, is dominated by units in a different market segment; high-end and near the Intracoastal Waterway or the Atlantic Ocean. This segment is only now beginning to feel the pricing pressure from an increase in "distressed" properties. Condos typically offer amenities not found in most Palm Coast neighborhoods.
Another thing to remember is that proximity to the coast has an effect on pricing. Think of Flagler County as being oriented north to south in four zones:
  1. The coast to the Intracoastal Waterway
  2. The Intracoastal to Interstate 95
  3. Interstate 95 to US Rt. 1
  4. West of Rt. 1
All else being equal, property values within these four zones will be progressively less as you go east to west. Notice the condos are in the first two zones.
Look at the skew of the two markets over the past several months:
  • Homes: mostly from the traditional Palm Coast sections (less than $100/SF) with some Grand Haven (usually above $100/SF and a handful of homes from the hammock area (some over $200/SF)
  • Condos: Mostly from Cinnamon Beach, Surf Club, Hammock Beach, Hammock Dunes, Canopy Walk, Palm Coast Resort, and Tidelands. There’s a small number from Fairways each month at prices well below $100/SF.
The Fairways condominiums are much more comparable to the under $200 thousand market than any of the other condos but they represent a small minority of condo sales.
Price/SF is only one way to look at market values. It’s the prime tool used by Zillo and other similar services. Unfortunately price/SF doesn’t consider factors such as a pool, view, frontage (golf, canal, Intracoastal, etc.), or construction features.
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