Amid an expanding economy and a growing demand for housing, San Diego County's long ailing condominium market is showing signs of recovery.

While it's too soon to call the new interest in condos by consumers and builders a rebound, the market no longer is on life support, industry observers say.

"Everybody seems to be in the market or considering it, which is a change from a couple of years ago, when nobody was," said Lance Waite, San Diego division president of Western Pacific Housing. "That's a sign that it may be coming back."

Three years ago, homeowners showed little interest in resale condos, said Century 21-Carole real estate agent Laurie Lustig-Smith.

"One day they woke up and (condos) started disappearing and prices started skyrocketing," she said.

DataQuick Information Systems, which monitors San Diego's residential market, reports that today condos are three times more popular among home buyers than they were five years ago.

In fact, resales of condominiums are growing while those of single-family homes are declining. Through the first nine months of this year, condo resales were up 3.4 percent while single-family home resales were down 7.2 percent, compared with the same period in 1999.

It's not hard to see why condos are attracting interest. Resale condos were selling for a median price of $167,000 in September, compared with $245,000 for single-family homes, according to DataQuick.

Along with rising prices and sales, San Diegans are buying and selling condos for different reasons than in the past. The lure of downtown living is one factor, and there is a greater variety in the type of units on the market, from luxury high-rise models to more traditional homes in complexes offering swimming pools, tennis courts and other amenities.

Historically, condos have attracted a mix of buyers from renters who wanted to make the first step toward single-family home ownership to the elderly who wanted to downsize.

"This year I've noticed the owners who are selling are moving up," said self-described "condo king" Richard Mehren, a real estate agent who specializes in the Interstate 15 corridor. "In the past people were moving out-out of town, out of state."

In the past 10 years, many condo owners felt trapped because of declining values.

One of them is Bob McDonald, who in 1991 never dreamed that his $108,000 condo in the then-booming Rancho Penasquitos area would become a millstone.

"It was in my price range," he recalled. I had just gotten my first real job and I wanted to move out from my parents and have some privacy."

Hoping to move earlier, he was forced to hold onto the unit for nearly a decade, and just recently sold the home for $145,000.

"If I had to do it over again I would live at home (with his parents) longer, save my money and buy a house," he added. I bought this thinking I could turn it around in a couple of years. Then the market fell out. I owed more on my loan than the house was worth. It was not a good feeling."

While McDonald's experience was common, the dynamics of today's high-priced real estate market again has made the condominium a viable alternative for those looking for housing.

MarketPoint Realty Advisors, a consulting firm on the local housing market, reported 25 projects in active sales as of Oct. 1.

Located from Carlsbad to Rancho Bernardo, from El Cajon to Chula Vista, the projects ranged in price from $84,900 for a condo conversion in Vista to more than $1 million in downtown San Diego.

Downtown, with its high price projects, is where the condo rebirth is most evident.

Richard and Carole Mergler can't wait to get into their 1,500 square-foot condo now under construction on the 18^th floor of Bosa Development's Horizons project. Their $550,000 unit features a spectacular view of San Diego Bay.

"This is a different type of living," said Carole Mergler, 52, recalling the 3,200 square-foot house her family occupied in Coronado for 15 years.

Added her husband, "you get to be 55 years old and feel like a little kid. It's something we've been waiting for a long, long time."

What makes the return of new condominiums here so striking is that construction of the units virtually halted in the early 1990s, when two factors joined to kill the market.

The recession, which hit hard at first-time home buyers and a proliferation of lawsuits over alleged construction defects convinced many to exit the business.

"We don't want to be sued on every condo project we've built," said Carlene Baskevitch, project manager for Pardee Construction Co.'s San Diego division, once a leading condo builder.

"You'll find with a lot of builders, they have taken that conservative approach. This was a corporate decision we decided to make due to the repeated litigation with construction defects on condos."

When lawsuits began to rock the construction business in the 1980s, San Diego attorney Thomas Miller stood at the epicenter.

Miller has recovered more than $350 million on behalf of home and condo owners since 1981. More than $40 million of that was for suits filed in San Diego County.

One in two condo projects still report major construction defects, Miller said. A third of those are involved in litigation. But that isn't the reason for the decline in condo construction, he insisted.

"Here is my take: The builders have basically shied away from building attached product because there is a bigger market for single-family detached," he said.

"The economy is booming. People can afford to get into lower end single-family homes and because there is no (condominium association) board of directors, the builders are able to get away with more shoddy construction."

Builders adamantly disagree with lawyers like Miller, saying their homes are better built than ever before.

"We, as an industry, are a lot wiser," said Ure Kretowicz chief executive officer of Cornerstone Communities.

Despite continued litigation the demand for entry level homes has helped some San Diego builders overcome their condophobia, said Carlene Wilkie, vice president of marketing for Brookfield Homes.

"They are starting to put their toes back in the water," she said.

Sherm Harmer, president of Olson Co., has shifted his focus from suburban houses to in-city condos to meet the needs of a growing market of singles, empty-nesters and young marrieds.

"If you can build lower-priced product, there is a huge demand," Harmer said.

The look and feel of today's condo is a far cry from the early 1960s, when San Diegans could buy a unit for $18,000. In those days, hearing toilets flush and listening to your neighbors' conversations through thin walls was a part of condo living.

Condominiums are "becoming more like small houses and less like apartments," said La Jolla architect Mark W. Steele, who chairs the city's Planning Commission. They're tending to be a little larger and have pretty much all the amenities of a single-family home with the exception of the yard."

Whether San Diegans like it or not, their future may increasingly include condo living. That's because the region is running out of land for single-family home developments, planners say. Future growth must be accommodated in higher-density developments.

"What makes the shortage of condominium and town homes type housing critical is they tend to be more land-efficient," said Tom Coyle, senior vice president of the California Building Industry Association.

Coleen Frost, the city of San Diego's lead planner on developing a new master plan for future development, said roughly twice as many new condos as single-family houses will be needed to handle growth over the next 20 years within city limits. In the future, many San Diegans could spend their entire lives living in a condo, she said.

"This is a big change."

Mike Armstrong, general counsel to home builders Barratt American, sees an urgent need to provide affordable housing.

"I ask myself: ‘Where are my kids going to live?' My youngest graduates from high school this year. Where is she going to be able to afford to rent let alone buy?"