When I first entered real estate, a young man asked me a question I couldn't answer; not really.
"Aren't condos and townhouses the first to go down in value?"
In my limited experience, that wasn't an issue. The market in 2001 was not super exciting, but it was limping along. It wasn't too long before the years on steroids were raising values and demand in every category. Condos were so popular that apartments were being converted to keep up with the demand.
Fast forward 2010.
Condominium values have suffered greatly in the real estate bubble.
There are several reasons:
1. Overbuilt - many of the last conversions are now called 'repartments' as the developers try to rent them to cover at least some of their losses. Supply was gushing, but demand dried up.
2. Domino effect of defaulting owners. As owners default on HOA and delinquencies rise, communities are in distress. Assessments are sometimes levied to existing owners to cover the lost revenue. Grounds and maintenance suffer.
3. Lack of affordable financing for buyers. Communities with over 15% delinquent HOA or over 51% investors lose their FHA and VA status. Buyers can't afford the downpayment, so sellers have to keep lowering the prices to attract the few who can afford a 25% to 30% down payment. This turns out to be an advantage to an investor, because the prices go low enough to make them affordable.
Condominium values are down over 50% and more here in the Jacksonville area, making it an affordable and attractive time to invest. Investors can purchase a condo and still have payments that create positive cash flow with their tenants.
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