In Current Market, are Condos Still a Good Buy?

For years, the American dream was to own your own home.

This traditionally meant a single-family home. Not only because there were fewer vertical developments, but for the simple reason that single-family residences appreciated handsomely over time. Condos didn’t.

Until the last few years, that is. Median price gains for condos actually have outpaced that of single-family homes nationally, and in 2005, condos appreciated approximately 13 percent over the previous year, according to the National Association of Realtors.

But things are shifting yet again, and the 2006 housing market is a very different story. Rising Florida mortgage rates and growing inventories of condos for sale are contributing to a slowdown, in some areas an extreme one. How bad has it gotten? According to the Florida Association of Realtors, statewide existing condo sales for April decreased 37 percent from the April 2005 volume.

The median sales price of Florida condos sold in April 2006 rose 4 percent from the previous year, with the Realtors predicting a median home price increase for both condos and single-family residences of a modest 5 percent this year.

Up until this year, double-digit price appreciation attracted speculators to markets like Miami, Broward and Palm Beach. New condos were bought and flipped at a profit before they were even completed in many cases. What a difference a year makes. There’s little room for this sort of speculative flipping in the current market.

Even so, condos offer an attractive lifestyle for home buyers looking for convenience and relatively low upkeep. Another perk is that condo units usually are less expensive than single-family homes in the neighborhood, making them a good choice — possibly the only realistic choice in some areas — for first-time buyers.

SO IS A CONDO A GOOD BUY?

It could be, under the right circumstances. To ensure a good buying experience, diligently investigate before you buy. The condo construction business has exploded in recent years, but so has litigation against developers for shoddy construction. Be wary of area developers who are less experienced. And take note of inventory levels.

Talk with owners in a condo development to find out how responsive the developer was in dealing with problems as they came up.

When you buy a condominium, you become part of a homeowners association that deals with co-owner issues. Dues are collected each month to pay for maintenance. However, precisely what is covered by the dues differs from one complex to the next. It can even differ from one phase of a project to another. Make sure you understand exactly what the dues cover.

These fees may increase over time, which will up the cost of ownership. In an existing complex, you can find out how often the dues have increased in the past, and by how much. In a new development, there is no such history. If the dues are not realistic in terms of projected maintenance expenses, you can expect additional assessments will be levied later on.

Look out for complexes that are largely investor owned. It can be difficult to arrange Florida home loan financing to purchase in complexes that are primarily tenant occupied. Also, owners tend to take better care of their homes than do absentee landlords. If a lot of speculators were to cash out at once, this could drive the property values down.

As we’ve seen in many segments of the Florida housing market, over-building can also have a negative impact on property values. Find out how many condo projects are in the pipeline in the area before you buy. If there is a lot of development planned that will compete later with anything you buy today, insist on quality, location and a competitive price.

It’s a buyer’s market, after all. Be sure you take advantage.