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news
Joined: 14 Jul 2007
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Location: Greater Boston
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CJ
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 Posted: Wed May 28, 2008 3:56 pm GMT Post subject: |
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| Quote: | Among condos, sales fell 22.2 percent to 1,714 units during April, Warren said. However, median condo-sales prices dropped just 1.8 percent to $270,000.
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I really don't understand when the SFH's median price dropped 12 percent, why condos only dropped 1.8 percent? In the old days, condos always dropped first and more when housing market is on the down turn.
Any idea? |
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admin
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Joined: 14 Jul 2005
Posts: 1826
Location: Greater Boston
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| Posted: Wed May 28, 2008 4:25 pm GMT Post subject: |
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| CJ wrote: |
I really don't understand when the SFH's median price dropped 12 percent, why condos only dropped 1.8 percent? In the old days, condos always dropped first and more when housing market is on the down turn.
Any idea? |
My hypothesis, which is just a guess at this point, is that the drop in SFH prices is due to tightening credit. The ceiling on what people can borrow is falling because lenders are requiring down payments again and higher investor and public scrutiny is reducing the fraud and negligence that produced unsustainable, loose credit through last summer. Houses cost more than condos, so a falling ceiling hit them first. I wouldn't expect the discrepancy to continue forever since houses and condos are substitute goods for each other to some extent - I would expect their price changes to at least partially feed into each other after a delay.
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JCK
Joined: 15 Feb 2007
Posts: 559
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| Posted: Wed May 28, 2008 7:11 pm GMT Post subject: |
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| CJ wrote: | | Quote: | Among condos, sales fell 22.2 percent to 1,714 units during April, Warren said. However, median condo-sales prices dropped just 1.8 percent to $270,000.
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I really don't understand when the SFH's median price dropped 12 percent, why condos only dropped 1.8 percent? In the old days, condos always dropped first and more when housing market is on the down turn.
Any idea? |
One other possibility a shift the proportion of condos that are selling in this week market. I can imagine (based on absolutely no data, mind you) that newer, (relatively) more expensive condos are still selling, whereas crummy ones in run down tripledeckers and the like are not.
So even if the newer, more expensive units are dropping in price, if they are making up a bigger proportion of total sales, median prices could increase, even if the price on any given.
Also, someone should correct me if I'm wrong, but weren't a huge number of condos built during the last run-up in the 1980s due to a some strange code in the tax provisions that encouraged overdevelopment? |
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john p
Joined: 10 Mar 2006
Posts: 1820
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| Posted: Thu May 29, 2008 1:21 am GMT Post subject: |
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I agree with the lower "ceiling" comment, tightening credit, and crumby stock not selling as well.
Again, if you look at an April statistic, it is based on a deal made in February. If you look at February 2007 to February 2008, you'll see that the interest rates went up a full point. That's alot. If you run a mortgage of $346k @6%, try to see how much house you can buy with the same mortgage payment @7%.
Further, people are losing affordability due to bills, especially those on the entry level price point. Wages need to catch up.
I am surprised and disappointed that interest rates haven't dropped in this critical buying season. Dropping house prices are the major problem in the credit industry. My hope was that they lowered rates but raised lending standards so qualified, responsible entry level buyers could get opportunities.
I think we've got to consider inflation more and more. Think about all that money that was pumped into the market due to the credit bubble. There is an abundance of money out there; the question is who gets some of it? People I know with lots of capital talk today about risk, and when I give him my speech about the working class and ownership rich, he says that people aren't going to put their money on the line right now unless there are some real rewards available to them.
Like Karl Case, I thought that house prices were set to hit a floor, but this last month of increased interest rates have put that off. I thought it made sense for the banks to offer lower rates and get obligations from responsible younger buyers than to own more and more and more homes from foreclosures. |
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CJ
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| Posted: Thu May 29, 2008 4:57 pm GMT Post subject: |
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I thought about the lower "ceiling" too, but if you consider the median prices of condos and SFH, the difference is not that much today. And condo is usually smaller. When you count the $150-400 HOA fee, that's about $20-65K you can borrow. It does not make sense to buy a condo now. Some retired people may consider buying condos, but the trend is moving to south.
It's hard to explain this question.
BTW, regarding to the interest, a friend of mine with 20% down just got an interest less than 6%. It's not bad. |
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JCK
Joined: 15 Feb 2007
Posts: 559
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| Posted: Thu May 29, 2008 5:29 pm GMT Post subject: |
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| CJ wrote: | I thought about the lower "ceiling" too, but if you consider the median prices of condos and SFH, the difference is not that much today. And condo is usually smaller. When you count the $150-400 HOA fee, that's about $20-65K you can borrow. It does not make sense to buy a condo now. Some retired people may consider buying condos, but the trend is moving to south.
It's hard to explain this question.
BTW, regarding to the interest, a friend of mine with 20% down just got an interest less than 6%. It's not bad. |
Couple comments. I don't think that condos in the same town or area are that close in price to SFHs. Statewide, I suspect condos are disproportionately in the Boston area, as compared to SFHs. So I'd be careful about making comparisons between the median prices.
This is readily apparent when you look at the data:
http://www.boston.com/realestate/specials/07_08_march_ytd_sales_condo/
http://www.boston.com/realestate/specials/06_07_sales_single/
Compare, for example, Brookline SFH prices to condos. (Condos are 1/2 the price of SFHs.)
Second, re the HOA fees. There are many advantages to a SFH home, but avoiding the HOA fees for a condo are simply not one of them. These fees include things like master insurance, landscaping, heat and/or hot water, if not metered by the unit, and should also include long-term building maintenance costs and other routine expenses such as common area cleaning and utilities. People treat HOA fees like they're some sort of scam, but, if the condo is run properly, it should simply reflect the amortized costs of ongoing property maintenance that you would have to pay if you buy a SFH.
Yes, some of the money goes management fees, but comparing the amount of money my friends with SFHs end up paying in maintenance (e.g., $13k to repaint the exterior of their house, by contrast, I'm paying about $300/mo in condo fees), don't for a minute thinks that buying a SFH will save you money. If the HOA fee is factoring into your affordibility equation for a condo vs. SFH, I strongly suggest you remove it as a factor. If you purchase a SFH, you will need that money that would go to an HOA fee for repairs and other ongoing maintenance to your home. |
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