Most Post-2006 Condo Buyers Are Underwater?
In an article describing how co-ops are much better positioned for the downturn because, unlike condos, their position in foreclosure proceedings is senior to the bank, comes this doozy of a quote from the president of a property management company in Manhattan: I think it’s safe to say that the value of any apartment purchased…
In an article describing how co-ops are much better positioned for the downturn because, unlike condos, their position in foreclosure proceedings is senior to the bank, comes this doozy of a quote from the president of a property management company in Manhattan:
I think it’s safe to say that the value of any apartment purchased in the last two years is less than its purchase price. The simple calculation is that if you bought an apartment a year ago and financed 90 percent of the purchase price, as many did, and now it’s worth 20 percent less, you’re upside-down as an owner.
That’s another reason why co-ops are in better shape: Most owners had to put down a minimum of 20 percent when they bought.
The Downside for Condos in a Downturn [NY Times]
> “cwb: To be blunt, if you only have 10% you can’t afford to buy.”
Plus, don’t you then have to pay mortgage insurance?
BH76 – the Condo board only cares about the maintainace – which the Bank is responsible for.
newsouthsloper – yes
Gravis – “Simple. If I’m laid off and/or forced to earn less, then the more I borrow, the less chance I have to successfully pay it off.”
Except again it is not the same buyer in the two different housing types (condo & Coop) – The person who payed 10% down may have borrowed less than the person who put down 20% and if you lose your job (and cant get another) then it probably matters little if you put down 10 or 20% – you are still selling or being foreclosed.
The ONLY overall difference is how much equity you and your fellow owners have in the place. And here – generally – older buildings (generally coops) may have an advantage – this is because if people have equity they will sell rather then foreclosed and the rest of the holders wont be stuck with late or no common payments for longish periods of time.
All the due diligence in the world (and we know that few actually really do good due diligence) is going to change that the “snooty” Coop board approved who has/had 20M shares of Lehman Brothers in the bank to back up his mortgage – now has ZERO.
Every Coop board in NYC would likely have approved someone whose earnings and net worth were largely tied up in Madoff, Bear, Merrill or hundreds of hedge funds (now worthless), or in RE like Maclowe(bankrupt), Tischman Speyer (will be bankrupt soon) and thousands of other seemingly “safe” investments.
Unless the “snooty” coop made sure that its buyers had substantial Municipal or Treasury Bonds – people all over the economic spectrum will be finding themselves in apartments they can no longer afford….
cwb: To be blunt, if you only have 10% you can’t afford to buy. Keep renting, keep saving. The former is getting cheaper, which makes the latter happen faster. One of the great lessons from the bubble is that financability and affordability are not synonymous.
Condo Board has only the right to sue for arrears in common charges — bank gets the condo — and it is a long, difficult procedure. Read the article — there is a big difference because condos are real property.
If someone in my condo building defaults, cant we just foreclose and force them to pay back-maintenace? Even if they sell at loss – Isnt the condo board first in line for the proceeds from the sale (before the bank)?
Conversely, If the bank forecloses arent they responsible to pay the maintence?
So … what people are saying is: my wife and I should stop considering buying when we have 10% to put down.
Fsrg,
Sounds about right, this is a 10 unit co-op to be exact.
And I’m the only person to buy into the building in the last 10 years.
The rest of the owners have been there for quite a while.
Yeah, Snark…it is definitely well-run. We have a few of the long time “hippie” Park Slope folk in the building who are a great combo of relaxed attitudes, yet they still maintain a good, firm financial footing with regard to the building. When it comes to everything else, they are super casual. I lucked out.
My maintenance charges are less than $275 a month, if you can believe it.
But most of the places I looked at required at least 6 months worth of mortgage payments in savings.
For that reason alone, it seems to make co-ops more financially stable than condos.