I am often being asked if I feel that Condo’s are particularly risky in these trying times. Let me shed some light on the condo market and try to help you make the best decision possible. I will focus on the primary resident condo market as opposed to investment properties in Luxury locations or on the ocean. Condos are built with a specific client in mind. Condo owners are typically first-time homeowners who have good credit, previously were renters, who wish to enter the housing market. They often times use the condo as a stepping stone into the single-family housing arena but can not afford to do so at this time. Or the condo owner enjoys the relatively maintenance-free lifestyle that a condo offers.
The risk in ownership and potential depreciation in value lies in the age of the condo, management, Home Owner’s Association, availability of other condos in the complex as well as the town, taxes, and the barrier to entry for developers in the market place.
There are very few condo complexes in my region that I would recommend. The first thing that I look at would be the town in which the complex is located.
1. Has the town approved similar condo complexes that have yet to be built and would be in direct competition with the one in question?
2. More importantly, do the existing complexes or the one you are looking at have approvals in place for the developer to build more when the market shows signs of turning?
These two questions are critical in determining your risk and the probability of a further decline in value. Developers can typically be much more aggressive in their pricing of individual units and you will rarely win when trying to go head to head in competing for the attention of buyers.
3. Pay close attention to the spread between the cost to rent, own a condo, and a detached single-family. The greater the gap between these three factors will reduce your risk.
4. Is the Condo Complex FHA & VA Approved?
4. Please note that historically, condos are the first sector to lose value and the last to recover
There are a couple of condo complexes in the Southeastern portion of CT that I would feel extremely comfortable recommending to potential buyers. Unfortunately they comprise only a small fraction of the condos currently on the market and are losing value at a fast pace.
P.S. I do not have any affiliation, ties, or listings currently in the complexes being recommended.