New condos could become apartments as sales cool

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By Noelle Knox, USA TODAY
Updated 7/14/2006 3:24 PM ET
There's relief in sight for some renters as the oven-hot real estate markets cool: A huge number of new condos could be converted to rental properties over the next 18 months.
In Las Vegas, Phoenix, San Diego, Washington, D.C., and much of Florida, an estimated 25% to 40% of condos under development or apartments that were converted into condos


By Noelle Knox, USA TODAY

Updated 7/14/2006 3:24 PM ET

There's relief in sight for some renters as the oven-hot real estate markets cool: A huge number of new condos could be converted to rental properties over the next 18 months.

In Las Vegas, Phoenix, San Diego, Washington, D.C., and much of Florida, an estimated 25% to 40% of condos under development or apartments that were converted into condos for sale will be put back on the market as rentals, says Marcus & Millichap, an investment brokerage firm.

During the real estate frenzy, thousands of apartment renters were forced out by landlords who converted their units into condos for sale. Last year, about 200,000 apartments were sold for conversion to condominiums, on top of 135,000 new condos.

In Scottsdale, Ariz., condo conversions eliminated 15% of rental units. Vacancy rates were squeezed by the rising number of people who couldn't afford the escalating home prices.

As renters in sizzling markets have scrambled for anything available, rents have surged. In the Miami-Fort Lauderdale area, "Not only are rental prices up 12% to 15% in the second quarter, but the number of people signing leases is up 23% over last year," says Ron Shuffield of Esslinger-Wooten-Maxwell Realtors.

In recent months, though, the inventory of condos for sale has swelled. And buyers have vanished. Developers are turning condo projects into apartments or canceling them. Some landlords are inviting back tenants because they can't sell the units.

Not all renters will get a break. In Seattle, Philadelphia, Los Angeles and Portland, Ore., there's still a supply-demand balance for condos, Marcus & Millichap says.

But the "reconversion" trend is accelerating. In Atlanta, Lane Co. is all but abandoning condo development. Two of its current projects are now destined to be apartments.

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