Nationally, condominium inventory is at its highest levels, however, many metropolitan areas are starting to see the number of condominiums on the market decrease dramatically. This latest trend means higher prices are on the way, according to San Diego's largest condo development company.

Like any other commodity, real estate value is based primarily on supply and demand. The supply has begun slipping across the country (as tracked in this column) and demand is at or higher than levels a year ago.

Buyers still want the latest amenities and more square footage, says Dennis Serraglio, director of sales and marketing with Bosa Development, in a recent piece for the San Diego Metropolitan.

"The reduction of inventory alone will cause a turnaround in the market within the next six to eight months," Serraglio says. "But pair this with improving financing options, lower interest rates and lower pricing, and the factors are all in place to support a revival in the market. When inventory dries up, condo prices will increase. It's not a matter of if, it's a matter of when."

As with its single-family counterparts, size matters for buyers.

According to the 2005 American Housing Survey, the average size of an owner-occupied multifamily unit was only about 1,400 square feet. Meanwhile, future downtown residential offerings at least in San Diego on prime development sites will include condos with more square footage, Serraglio says. "Future projects will average 1,600 square feet. The increase in home size is a major turn from what was demanded by buyers four or even five years ago."

Published: October 13, 2008

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Mr. Carr has covered real estate since 1989. He is the author of Real Estate Investing Made Simple. Got a personal real estate issue? Post your questions and comments at Anthony’s blog: commonsenserealestate.blogspot.com.