Wooing millennials to buy condos: Really tiny condos
As more millennials graduate into better paying jobs, marriage and parenthood, real estate developers are doing all they can to entice this renter-nation generation in home ownership.
That means making urban homes more affordable, which means making them smaller. The tiny house movement may still be something of a novelty on home-remodeling TV shows, but in downtown Washington, D.C., as in other major cities, the tiny condo movement is moving quickly into the mainstream.
"They definitely notice it's smaller, so it is an explanation; it takes a little bit of an adjustment," said Chris Ballard, principal at McWilliams/Ballard, a marketing firm. Ballard works with the Peterson Cos., the developer of Ontario 17, a new condominium building in D.C.'s young and vibrant Adams Morgan neighborhood.
The condominium building, whose exterior is still getting finishing touches, is about 70 percent sold. While its penthouse units went the fastest, its tiny studios, barely bigger than 300 square feet, are getting serious millennial attention — especially with a price point of just $275,000, about half the neighborhood's median price, according to Long and Foster Real Estate.
"Things are getting smaller, and people are starting to understand," said Laina Lee, one of the sales managers at Ontario 17. "About 80 percent of all our buyers, including our studios and our one-bedrooms, have all been first-time homebuyers."
First-time homebuyers have been very slow to come back to the housing market post recession. They are still barely about a third of home buyers, when historically they make up more than 40 percent.
Rising faster than inflation, home prices shot up by 4.7 percent nationally in July from a year ago, according to a report released Tuesday from S&P/Case-Shiller.
"A slower rate of price gains is needed in order to make buying a home a more competitive option to renting," wrote Peter Boockvar, chief market analyst with the Lindsey Group, in response to the price report.
Young buyers have been forced to rent, but historically high rents prevent them from saving for a large enough down payment.
"We're definitely getting a consumer that's priced out of the market," said Ballard. "They look at older resales, and now they get to come and look at something that is brand new, and so that's a great difference, when you're comparing a 1970s build, older-type condominium with something that's brand new with all new fit and finish."
The building has a rooftop sundeck and modern lobby, and most units have a small terrace, but it's the add-on amenities in the teeny studio models that attract the most attention. Of course, the bed pulls out of the wall, but a dining table pulls down from a hanging picture frame as well. A sofa is built in to the bottom of the bed and stores the bedding. Kitchen appliances are all high-end, but they are slightly smaller than normal. The refrigerator is by Blomberg, a German company that is making a mint off the new trend in slimmer appliances.
Ballard claims that it is cheaper to buy at the Ontario than rent in D.C.'s red-hot apartment market. The vast majority of new development in the past five years in the multifamily sector has been on the rental side. Very few condominiums are going up, but the popularity of the tiny trend could change that.
"We spent a lot of time trying to plan it, it was actually harder to sell that product on paper than it is now," noted Ballard. "There was a lot of concern, people say 380 square feet, that's so small and then you get in there and a lot of times people say, this is bigger than I thought. We built out the closet so it's doubling hanging, we use every single square foot, there's not a lot of wasted space."
The building also doesn't have as many amenities as some of the more expensive buildings downtown. No pool. No fitness center. But no sky-high condo fee, either. It is all about keeping the price down and the sales up. The larger units at the penthouse level are still less than a million dollars, and they sold the fastest, mostly to downsizing baby boomers.
— CNBC producer Stephanie Dhue contributed to this report.