This Is the Right Time to Buy a Condo

By Ken Urman, Realtor

Favorable Market Conditions

Many individuals and families considering a home purchase should consider a condo right now.  Current market conditions are very favorable for condos. A condo purchase is a good way to take the

first step into home ownership or into a very desirable city. A condo purchase is also an excellent choice for many retirees or those nearing retirement. A condo purchase is also a wise step for families that know their children plan to attend a particular college or university. Buying a condo can provide relief from school room and board fees as well as providing a stable rental income down the road.

If you have been watching the housing market with a view to buying a new home, you have seen the prices of single family homes rocket to levels almost equal to those at the height of the housing bubble (seven years ago). At the same time, rental prices have also risen sharply. Condo prices, however, have not risen at the same rate in many parts of the Seattle metro area. Today, many who want to own their own home are asking, “Is this the right time to buy a condo?”

 

The Price Picture

According to data from the Northwest Multiple Listing Service, condo prices in 19 of the 36 sub-markets in King and Snohomish Counties remain more than 20 percent below their peak during the bubble. In fact, condo prices have fully recovered in only three areas: downtown Seattle, Bellevue and Kirkland (all of which are major job centers.  In many of these submarkets, rental prices are notably higher than mortgage payment prices paid by condo owners.

Like single family home prices, condominium prices have changed in different ways in different parts of our area. For example, condo prices in downtown Bellevue reached new heights last year, but this year, fell by 14 percent. Prices also fell this year in West Seattle, the Eastside south of I-90 and Burien. In many other neighborhoods, condo prices are rising at a faster rate than are single family home prices

 

FHA Issues

FHA rules and qualification requirements have created unique challenges for some potential condo buyers. On the one hand, condos are attractive options for first-time home buyers because the prices are typically significantly lower than prices of single family homes. On the other hand, however, unless they are able to qualify for private loans, many first time buyers will be unable to get a FHA loan on many condominiums.

In 2008 (when the bubble burst), the FHA required condo associations to be recertified every two years. Many condo associations lost FHA approval because they lacked a recent study of their cash reserves, they had more than 15 percent of units delinquent on dues, or more than half of the units were rentals. The ability of many condo associations to recertify every two years made it impossible for first time buyers to qualify for FHA loans.

Certification of condominium associations for FHA loans also affects the attractiveness of the condo to some other buyers, as well. Many realtors and potential buyers view FHA certification as a seal of approval on the association as a sound and reliable business. In addition, the investors who helped the single family home market recover were also shut out of many condos because the associations capped the number of units that could be rentals in a desire to keep owners of the condos happy.

 

Assessing the Pros and Cons

Purchasing a condominium is a good way for single people, young married couples, and young families to

take the first steps of home ownership. Condominiums are also a popular choice for retired (or near-retirement) individuals or couples who might want to unburden themselves of larger homes, home maintenance, and yard care. Many other people want to own their home, but value the freedom to come and go without concerns of security, upkeep and yard care. What is more, many people prefer living in closer proximity to their neighbors.

Clearly, condo living has both pros and cons for most owners. What might be an advantage for one condo owner is considered a disadvantage for another. Therefore, each person or family considering purchase of a condo should carefully weigh the alternatives with a knowledgeable Realtor before signing a contract.

Challenges of condo ownership and lifestyle include:

1.     Property values in the future can be affected by other owners – due to noise, lifestyle, upkeep of the unit, etc.

2.     Annual dues and special assessments –These are typically consistent, and they cover maintenance of the common areas, insurance and repairs. Yet, they are an additional monthly cost that can preclude ownership for some. Further, they can increase dramatically when a big project (roofing, replacing the pool, re-paving the parking lot) assessment is charged.

3.     Community rules typically govern such matters as quiet times, noise regulations, whether or not a unit can be rented out, parking, visitor parking, and much more. Some find these rules restrictive.

Benefits of condo ownership and lifestyle include:

1.     Community rules typically govern such matters as quiet times, noise regulations, whether or not a

unit can be rented out, parking, visitor parking, and much more. These rules typically protect residents from abuse by neighbors.

2.     Lower cost for entry to ownership and lower monthly payments. Typically, condo prices are about half of single family home prices in this area. Lower taxes.

3.     Parking area, community area and amenities are tended and maintained by the community association. Community security is managed by the association. Rules enforced by the association.

4.     Annual fees and dues often cost less than putting aside money regularly for home and yard maintenance and repairs.

 

       If you are considering a change, ask yourself, “Is this the right time to buy a condo?” This is clearly the ideal time to buy a condo in the Seattle –Mercer Island – Bellevue area. If you think a condo might be a good purchase at this time, please call me. I have helped many clients sift the pros and cons of condo purchases and sort through all of the documents, contingencies, rules and regulations and financing complexities. It would be my pleasure to help you evaluate a condo purchase in such a favorable market. If a condo makes sense for you, I can help you purchase the “right” condo property. Remember, I’ll bring the coffee.