At the same time that the price of a new house is on the rise throughout the country, major cities are seeing a steady increase in the construction of new high value condominiums.
Boston offers a good example of the current trend. Condo sales in the city's downtown and surrounding areas jumped significantly during the first quarter, relative to the same period last year, driving the average sale price to almost $950,000. The Boston Globe noted that high value condos are "flying off the market" about eight times faster than they did in 2013, with luxury units spending an average of only 20 days on the market.
Millennium Place, a condo development that opened in late 2013, listed 256 units with prices ranging from $550,000 to $3.5 million. According to the Globe, it was only a few months before the last unit was sold. The Globe pointed to several other luxury condo developments that have opened recently. During the first quarter, four units sold for more than $6 million each.
The demand for high end housing represents something of a turnaround for the downtown area, although local real estate executive Mark Lippolt told the Globe that he is "reluctant to call it the Manhattanization of Boston."
The broader trend is unmistakable. In 2005, multifamily housing accounted for less than 20 percent of all housing starts. Last year, multifamily housing comprised more than 30 percent of starts. David Crowe, chief economist for the National Association of Home Builders, explained why he believes there has been such a substantial upswing in urban apartment and condo building.
"The 25- to 34-year-old age group is focused on living near their peers. They want be socially engaged and live near work. They want to reduce their automobile use. All of those things aim at high-density, urban-type living," Crowe said
High-rise construction continues to accelerate in established housing hot spots such as New York and San Francisco. However, Time contributor Sam Frizell cited several specific examples of large apartment and condo buildings in development to show that "changes aren't just occurring in the biggest traditional urban centers." He said the growing popularity of luxury condos can be seen in cities all over the country, as well as their suburbs.
Ken Simonson, chief economist for the Associated General Contractors of America, looked at another side of the subject in an interview with Time. He said that the urban housing market "is driven much more by people who are either choosing to live in the city or in the near-in suburbs, particularly people who are just getting their first job or don't have confidence that their job is going to last long enough to warrant buying a home."
With Americans of all financial situations tilting toward urban life, insurance carriers will need to be certain they can accurately calculate replacement costs for everything from small apartment buildings to high value condos.
e2Value offers specialized valuation solutions for insurers with different needs. Our A&A (Additions & Alterations) estimator was designed to be used for condo and co-op units. This tool allows users to select the extent of the coverage, for example whether appliances, lighting, wall coverings and more, are included or not. Our A&A estimator works for condos and co-ops of any size or value where the insured structure does not include the roof, foundation or exterior walls. We also offer a full range of replacement value solutions for other residential, commercial and farm & ranch properties.