Why Isn’t the Condo Market Rebounding?

July 24, 2015

NEW YORK – July 23, 2015 – While construction of single-family homes and multifamily rentals is on the rebound, condo construction sunk to new lows. Any rebound in the condo construction market has been delayed by stringent rules on condo mortgages that took effect post-housing crisis, and stronger demand among young people for rentals.

Condo construction in the first quarter comprised only 5.5 percent of all construction of multifamily housing – the lowest ratio since the Commerce Department began tracking the data in 1974. Historically, condo construction falls at a 24 percent average.

Condos traditionally offer higher returns for investors than apartments.

“Many developers would rather be building condominiums,” says Peter Bazeli, senior vice president at New York-based real estate consulting firm Weitzman Group. “With condos, you’re paying down debt with every closing and then putting money in your pocket right away.”

But many factors hamper the condo market’s recovery. For one, economists say young adults have been flocking to rentals instead, and condos typically cater to entry-level buyers. Also, construction loans limit the supply of condos built. Developers say they can get a construction loan for about 75 percent of the cost of building an apartment complex, but only about 50 percent for a condo complex because lenders deem it a higher risk.

The Federal Housing Administration (FHA) tightened its lending standards from 2008 to 2012, which has made condo funding even tougher, too. In order for the FHA to insure mortgages in a condo complex, at least half the units must be owner-occupied, and no more than half can be FHA-insured. For condo projects under development, at least 30 percent of units must be under contract for sale before the FHA will start backing mortgages.

Economists say those factors have kept the condo market sluggish and still far from recovery. The median condo resale price in May was $216,400, about $15,400 less than its pre-crisis peak in June 2005. On the other hand, the median resale price for single-family homes in May was $230,300 – only $600 less than its pre-crisis peak in July 2006.

But some developers see glimmers of a condo rebound forming.

“Rising apartment rents provide renters more reason to buy instead of renting,” the Journal reports. “Job growth is improving for young would-be buyers. And real estate lobbyists say they are making inroads in Washington to build support for easing the FHA restrictions on condo mortgages.”

Source: “Condos Left Behind in Housing Rebound,” The Wall Street Journal (July 21, 2015)

© Copyright 2015 INFORMATION, INC. Bethesda, MD (301) 215-4688


Orlando’s Favorite Resort Rental Communities

February 15, 2013

If you have any friends or family coming to town you might want to share this….

Orlando’s Favorite Resort Rental Communities

Dreaming of buying a vacation home in Orlando, the “Vacation Capital of the World?”

1. Reunion Resort & Club is not only the premier resort in Orlando, it’s one of the finest in the country. World-class luxury.
2. Paradise Palms by Lennar Homes includes a poolside Tiki bar, movie theatre, tennis courts, fitness room, and game room, cafe, resort pool with water features. Need a break from Paradise? A shuttle will whisk you to the nearby Parks.
3. Vista Cay by Pulte Homes is adjacent to the Orange County Convention Center, a mile from Sea World and a few miles from Universal Studios. Vista Cay appeals to vacationers and conventioneers.
4. Veranda Palms by Park Square Homes is an enclave next to the 1000-acre Shingle Creek Preserve. Feels like you are out in the country, but Disney World is 12 minutes away.
5. Lennar at Champions Gate gets our best “Newcomer Award”. Announced to the public last week, the resort offers golf, tennis, and several clubhouses with grand opening incentives in effect.

If your family or friends are looking long term rentals (12 mo) in Sunny Central Florida or Celebration ~ CALL Imagination Realty today at 407-361-7653.

ReunionLakeSide resized 8-9-12

REF: Central Florida Real Estate Preview 2/15/13