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]
11217 actually inadvertently brings up another issue being ignored – size of the overall property – If you are in a 3-5 family Coop (or condo – although less of those) you are MUCH more vulnerable to another unit defaulting then if in a larger coop or condo –
more evidence that these coop v condo generalizations do not work – no matter how much the condo haters want to make it so.
Fsrg,
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.
If prices go down %20, no one in my co-op is under water, while there will be some in a condo.
When a coop owner defaults, and the bank does not pay the maintenance fees (which is said to be happening), the cooperative can repossess — and it’s not that hard. And the then Coop can hold the apartment and rent it until the market improves to sell. Much better situation.
It sounds like you bought into a well-run coop, 11217. The smaller the building, the stricter I think they have to be.
I wonder what’s going to become of all the little 4-5 unit in-fill condos that popped up in brownstone Brooklyn. I like the looks of a few of them, but they seem like a dicey proposition.
Just as a point of reference, I bought into a small brownstone co-op.
I had to prove to have one year’s worth of mortgage payments in savings after I paid the downpayment.
It seemed excessive (and almost ridiculous) at the time, but it sure does feel good to have that cushion of money sitting around now.
It sounds like the issue is getting a little confused. Higher down payments are better for the co-op as a whole if the market goes down but obviously, as a buyer, if you are going to walk away from your apartment because it’s so underwater then it’s better to have had less money on the table.
fsrq is right on that last point. These difficulties are arising largely because of the individual owner’s inability to pay.
I do believe however, that older, longstanding, maybe call them snobby or selective Coops have probably screened the owners more rigorously and know whether their balance shhets will weather them through a period of lost wages. The newer Coop developments with all their aggressive advertising are in a much more vulnurable spot…similar to that of a condo, essentially.
It is not only the expiration of tax abatements that increases charges. Most developer really low-ball operating budgets. Any new building can expect a 15-20% hike from the offerring plan monthly costs.
Ther have been too many very naive new buyers; seeing ever increasing property values along with salaries and bonuses. And yes, there are plenty of coop owners under water too. basically anyone who bought in the last 18 months would have a hard time getting even 80% of what they paid. When you look at the TImes — it is mostly new condos – people in existing buildings are sitting tight unless they absolutely HAVE to sell. Nothing is moving.
Yes lechacal
Some owners will default on common charges in both Condos AND coops
Sponsors of both Condos AND Coops will default
Owners of both Condos and Coops will have little breathing room if they loose their jobs
421-a abatements do not expire overnight, they take 15 years to expire – therefore call me in 10years when this becomes an issue for most “boom era” condos – BTW taxes are rising on Coops too
“various types” of financing were used on Coops and Condos
EXCEPT – you all seem to forget that Coops have an UNDERLYING mortgage – which may prove to be much harder to refinance when the time comes (generally every 10yrs in a conservative Coop) – and many Coops also financed with way to optimistic projections.
The point is – the NYT article had some points – but the one point that cannot be made – because it just isnt true – that Condos are somehow more at risk then Coops –