Buying a Condo: Pros and Cons

The Pros and Cons of owning and living in a condo should be considered carefully.

By Ken Urman, Realtor

When you make the decision to buy a new home, you will make many choices and decisions. One of the first choices you must make is whether to buy a single-family home or a condominium. Each

option has clear – and less clear – pros and cons. For most people, the differences between living in a single-family home and living in a condominium are significant. When considering buying a condo, evaluating the pros and cons is very important.

Let’s face it: the perfect home for your best friend might not be the perfect home for you. To help you make that choice, here are the most commonly discussed pros and cons of buying a condo.

The Pros of Buying a Condo

Buying a condo is like living in an apartment that you own, right? No annual rent increases, on-site maintenance, and an exterior you don’t need to maintain. Maybe.

1.       Maintenance. Having other people who take care of all maintenance issues is a big benefit of living in a condominium. The knowledge that you don’t have to do maintenance tasks is a huge plus for people with limiting health conditions, people who are very busy with work, those who travel frequently, and first-time homeowners. What is more, you do not have to worry about maintaining the landscaping. Having few, if any, maintenance tasks to perform also means you do not have to invest in all of the equipment necessary to maintain a property.

2.       Amenities. There is no question that condos offer great amenities. You have access to the pool, a fitness center, community activities, and (often) a community clubhouse that is available to you when you want to entertain. Many of these amenities can be a bit too pricey for a number of average homeowners. In addition, these amenities are available to condo owners without obligation to maintain the facilities or plan the activities.

3.       Security. Most condominiums are in buildings with locked entries or in gated communities. Many condos also provide either a doorman or a professional security guard. When you live alone or your physical condition makes you feel “vulnerable,” the added security is important. In addition, there are many people nearby that you could call upon in the event of an emergency.

4.       Affordability. Condominiums typically carry lower price tags than single-family homes. They, thus, offer a solid initial step into owning your own home.

5.       Elevators. Many condos are in buildings with elevators. There is no need to carry groceries up steps. If stairs present a physical challenge for you, life in a condo solves the problem.

6.       Lower Utility Bills. Living in a condo (rather than a single-family home) often incurs lower utility costs because the space is smaller and because many accessibility features and amenities are powered by community utilities.

7.       Urban Living Option. Many people are again choosing urban living. They can walk where they want to go or use public transportation. Good restaurants and great shopping are close.

8.       Predictable monthly maintenance or condo fees. Most homeowners do not have the same level of predictability in their budget.

9.       Lifestyle orientation. Some condo communities are geared to a particular lifestyle. A particular community might be geared to the singles lifestyle or to a retirement lifestyle. This typically means that the community offers activities and amenities desirable to those who have chosen that lifestyle.

These are wonderful arguments for buying a condo. However, like most things, there are some issues associated with condo ownership. It is important to understand the cons, as well as the pros before you buy.

The Cons of Buying a Condo

The very things that make condo living attractive to some people can be unattractive to others. Some of the most frequently mentioned “cons” of condo ownership follow.

1.       Special Assessments. Some condominiums are “underfunded.” This means that they do not have sufficient reserve funds for capital improvements and repairs (new roof, painting, or concrete repairs). When a critical need arises and the reserve is insufficient, condo managers sometimes find it necessary to impose a special assessment upon condo owners. This can be both costly and inconvenient for your budget.

2.       Condo Fees. The security staff, maintenance costs, pool maintenance and fitness center equipment are paid with funds collected from condo owners in monthly condo fees. Depending upon the size of the community, the level of luxury provided, etc., monthly condo fees can range from $100 to $1,000 or more. Not only should you know what the monthly fees are at the time of purchase, you should also know the rate at which fees typically increase from year to year.

3.       Non-resident Owners. A number of condo owners do not live in their condos. Instead they rent their condos. Some condo associations have rules that govern whether you can rent or how many units can be rentals at one time.

4.       You do not control the maintenance and repairs schedule.

5.       You might be compelled to pay for amenities you will never use.

6.       You must abide by community rules.  Some condominium units are noisier than others; some units offer less privacy than you might like. Possible restrictions may be in effect on noise, parking, pets, smoking, window coverings, and other details.

7.       The Homeowners Association. Many single-family home communities also have a homeowners association. These groups represent all condo owners in a community and are authorized to make decisions that affect everyone. Many of these requirements will be innocuous, some may be irritating. If you can accept most things, you are less likely to be bothered by the association or their rules.

8.       Less space in many units. Many condos are somewhat smaller than single-family homes. Without a yard, they also typically offer very limited opportunity to make your surroundings your own.

9.       Condos offer less privacy than single-family homes. Owning your condo does not preclude you being bothered by noise from surrounding units. You may also assume that if you can hear your neighbors, they can also hear you.

There are pros and cons of buying a condo. There are also pros and cons of buying a single-family home. People have different needs, lifestyles, and expectations.  The choice between a single-family home and a condominium home might be one you are prepared to make. 

If you would like to discuss the choice with an objective outsider, please call me. I have helped many potential buyers make this difficult decision. I can also help you place your decision within the context of the current market in our area. 

The Seattle Tech Migration

By Ken Urman, Realtor

I have commented frequently during recent months about the number of new jobs bringing people into the Seattle-Bellevue-Lake Washington area. These people are looking for, and buying, homes

and condominiums. They are contributing to the fierce competition for available properties in and near the job centers. Many of the people moving to the Seattle metro area are part of the Seattle tech migration.

There has been a “tech boom” in the Seattle area during the last few years. In fact, Seattle ranks second to the San Francisco Bay area among the nation’s four tech hubs.

Although people have been migrating from California to the Seattle metro for many years, the rate of the migration has increased. The source of the migrants has also narrowed in many cases to the San Francisco Bay area, specifically Silicon Valley.

Why Is the Tech Migration Happening?

As Silicon Valley became the nation’s primary tech hub, the Tech Giants like Google, Facebook, Apple, and others paid higher compensation and offered more perks to get top talent. The talent brought into an already expensive area found housing costs continuing to rise. The result was a cycle of rising compensation driving higher housing costs driving higher compensation.

As some employees grew tired of the ever-increasing housing costs, they moved to more affordable surrounding areas, with longer commute times. Eventually, these prices began to rise, more people were commuting, and commute times grew longer. According to one report, between August 2014 and August 2015, home prices increased 13 percent, rent increased 12 percent, and the average

Silicon Valley commuter spent 67 hours in traffic. Recently, the situation in Silicon Valley became so desperate that some of the large tech companies began supporting the construction of high-density housing, with some even lending their names to the structures.

The average software engineer was paid $132,000 in 2015 in Silicon Valley (according to recruiting company Hired). In 2015 in Silicon Valley, the median home price was $870,000. According to Zillow, the median home price in San Francisco is now $1.2 million.

People soon began to realize that their money would go farther and their quality of life would be better in other cities. Please recall that Google recently opened a facility in Seattle, for example. Based on differences in the cost of living in the various locations, Silicon Valley’s $132,000 when adjusted for local cost of living is $164,000 in Seattle and $195,000 in Austin, TX (another tech hub). The median home value in Seattle ($533,000) is half that of San Francisco. Austin’s median home value ($290,700) is one-fourth of San Francisco’s.

What Does It Mean For Seattle?

The Seattle tech migration has been going strong since 2012. Although Californians have been migrating to Seattle metro in large numbers since 1999, according to the Washington State Department of Licensing, the number of license migrations from California rose from 25,619 in 2012 to 37,624 in 2015.

Already, these migrants have impacted the local housing market, competing for available properties and contributing to the increase in local home values. Although Seattle has not been the top destination for tech workers leaving Silicon Valley, Seattle has already become a major tech hub. Software developer is the second most common job today in the area, with 45,312 workers. The average salary these workers earn is $119,000.

While many homeowners are delighted to see their homes bring high prices in the market and many community leaders are happy about the growth of the local economy, others are concerned that the situation in Silicon Valley will be repeated here. They point out that there is limited opportunity to develop additional housing now.

I believe that with strong leadership and thoughtful planning the Seattle metro area can continue to accommodate growth in the tech sector and provide commuting options that will permit growth in some of the surrounding areas. 

How Coffee Affects Home Values

By Ken Urman, Realtor

Believe it or not, coffee and coffee shops affect home values in nearby neighborhoods. Zillow CEO Spencer Rascoff revealed in his recent book, Zillow Talk: The New Rules of Real Estate," that houses located within a 1/4 to 1/2 mile radius of a Starbucks coffee shop are most likely to appreciate in

value the most and the fastest.

Before you laugh and shrug this off, please keep reading. There is scientific analysis behind the claim.

As you might know, I really enjoy a great cup of coffee. And in keeping with my general desire to support local businesses and companies headquartered in the area, I am a loyal Starbucks customer. You also might have noticed that I bring coffee when I meet with clients. A hot cup of great coffee is a terrific ice breaker.

The folks at Zillow (headquartered locally) have developed a very scientific system to determine where to open each coffee shop. If we are willing to trust their claims, they also have a way to predict the next hot spot neighborhoods. As for Realtors, they would have us believe we need only to follow their lead.

Nichole Goodkind, writing at Yahoo Finance, reports that Zillow analyzed the prices of homes located within a ¼ to ½ mile radius of Starbucks locations for five years after each shop opened. “They found that homes closest to Starbucks appreciated by 21 percent, while homes a bit farther

away grew in price by under 17 percent.” Specifically, according to the article, “they found that in 1997 a home within ¼ mile of a Starbucks sold on average for $137,000, while a home not near a Starbucks sold on average for $102,000. Today, the average home has gone up 65% in value to $168,000 but homes near Starbucks have tone up 96 percent to $269,000.

Zillow also addressed the obvious question, “is this a generic coffee shop effect?” They discovered that homes near a Dunkin Donuts appreciated 80 percent over the five year period, while those near a Starbucks appreciated by 96 percent.

If you are in the market for a house near an existing coffee shop, I would be delighted to share my vast knowledge of all coffee shops in the area and I would enjoy helping you drink (coffee) your way through neighborhoods within a ¼ to ½ mile radius of various coffee shops, including Starbucks, Dunkin Donuts, and other brands. Call me – I’ll bring the coffee!

It's A Great Time to Sell or Buy a Home

If you have been waiting for the local real estate market to rebound, your wait is over. Mercer Island, the communities surrounding Lake Washington, and even Seattle and Bellevue are very hot real estate markets now. In a nutshell: home prices are up, demand is high, and inventory (homes currently on the market) is low. In fact, the conditions are right for bidding wars for available properties. 

Recently, Seattle was listed as one of the top markets in the country for home sellers, in a feature article in Money Magazine. The housing market is changing, creating a “new playing field for homeowners, who are finally able to sell, as well as would-be buyers who’ve been delaying a purchase in anticipation that prices would keep falling,” Money reported. In addition, Seattle, Los Angeles, San Jose and Phoenix were listed as top markets for sellers, while Philadelphia, Chicago, Albany and New Haven/Stamford were top markets for buyers. According to the feature article, sellers should keep their expectations in line: Price increases are to be modest and gradual. According to Money, home sellers may have the most bargaining power in the West, while homebuyers may be more in control in the Midwest and Northeast.

 

Real Estate inventory on Mercer Island normally averages about 100 homes at this time of year. Today there are less than 60 homes available, and most of those available are in the very high end of the price range. On Mercer Island Median prices in 2011 rose 2.5 percent from $835,000 to $857,000.

Lawrence Yun, Chief Economist for the National Association of Realtors®, reported recently that sales are being driven by strengthening fundamentals – the improving jobs picture, rising rental rates, continuing low interest rates, and housing affordability – and prices are gaining on reduced supply.

Here is an example from a recent personal experience representing buyers who made an offer on an Issaquah home. After only a few days on the market, the listing agent had 12 valid offers on the property. My clients were among the 12. The offer accepted by the seller was possibly more than 10 percent over the listing price. I fought hard for my clients, but I could not advise the client to pay that much for that particular home. The sale of this home was frenzied, with too many buyers and too many emotions driving offers. 

This example is not a bad situation for the local residential property market. However, there are several clear implications to be drawn:

1.       Buyers should not be surprised by frenzied competitive bidding for available properties

2.       More homes are being listed every day, and patience will win out in the end

3.       People buying homes in this market would do well to trust and follow the advice of their Realtors® or Brokers, especially if they are new to the area.

4.       Homeowners, who have been waiting for the right time to sell, should call their consulting Realtor® today to discuss their options.

The Seattle-Bellevue-Mercer Island-Lake Washington communities real estate market is unique. Today it is a zooming market. Whether you are buying or selling, I advise patience and good counsel. If you have been waiting for the right time to list your home, please let me assure you that the time has come. I would be honored to list your home and assist you as your Realtor® and listing agent. If you are in the market to buy, it would be my pleasure to help you find and purchase the right home for your needs. Call me today at 206-499-4948.