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]
Gravis – how does having a smaller monthly payment make coop a safer investment??
And DIBS – my comment re: prejudice against new construction was aimed at Brownstoner – I agreed with your comment – dont be so defensive.
The finanical wherewithal of other owners is *definitely* an issue for non-flipping long-term owners. Prices are going down, many buildings are filled with people who are operating on thin margins because they had to stretch so much to buy at the top of the bubble, and over the coming years:
– Some owners will default on common charges
– Some developers will default on common charges
– Owners who have very little breathing room are losing their jobs
– Common charges are going up as 421-a abatements expire
– Many owners used various types of dangerous financing that will increase their costs (and likelihood of default) in the next few years
Bottom line: fewer people paying increasing costs, unless of course costs are reduced by eliminating amenities (which lowers property values even further).
I’ve been saying this for 2 years.
squattersrights – you can’t be serious. The NYT real estate section is still pro-developer and pro-broker. Its one of the least objective sections of the paper.
Nothing not true about the article but usually one of the major factors leading to default on common charge payments (in addition to losing one’s job obviously) is skyrokceting common charge payments which happens when a new construction condo loses its tax abatemet status and the charges skyrocket year over year. Not all condos exist under this arrangement
I suspect there are a lot more 10%-down coop buyers out there than some might think. Think of all of those “10% down, no board approval” sponsor sales that happened over the past few years.
I know of one building in Kensington, for example, where the sponsor sold off 75% of the apartments over a five year period.
BH76…you’re right, but that’s a completely separate problem from what most of us were talking about. It’s definitely generic to what joe the bummer was asking in the Open Thread.
The whole first half of this article was pretty straightforward story. Condo owner stops paying maintenance and there is little the building can do about it because even if they evict, at current prices, they won’t get any of that money back. This leaves the current tenants footing the defaulters share of the monthly bill for the entire time from first monthly default all the way through realsale which is likely to be a few years. In a condo, once the unit is resold, the condo gets the money back and thus the other tenants are not out of pocket forever. Given the size of some of these monthly maintenance charges, this would seem like a real issue, albeit a soemwhat rare one. Is there something not true about the article?
FSRG,
%20 down (vs %10 or 5%) results in a smaller monthly payment which, along with what Mr. B said (10:30am), made buying a co-op a safer bet.
If, however, condo prices go further south, co-ops WILL follow to a certain degree.