Friday Flashback: Condos “providing a ray of sunshine”

Yesterday’s post about Alaska Air’s condo-booster “article” reminded me of this 2007 piece in the Seattle Times: Condos a bright spot in housing market

The condo market is healthier than the detached-house market, and prices are holding their own. Those are the key findings from an analysis released Friday of the Seattle-area condominium market by Glenn Crellin, director of Washington State University’s Center for Real Estate Research.

“Crystal balls in real estate are typically very cloudy and imprecise, but it appears the condominium markets, both resale and new development, should outperform their single-family competition in Greater Seattle, with the possible exception of the high-end market.”

Since peaking at $299,900 in September 2007, King County’s median condo sale price has dropped 35% to $195,000 as of the latest NWMLS data. The single-family median is down 27% from its peak.

Cloudy crystal ball, indeed. You can see my 2007 comments about this piece here.

This part of the article really stuck out to me:

The MLS’ numbers demonstrate condominiums’ importance in providing a solution to the housing-affordability problem.

The median price of condos sold in King County this year is $286,000. That’s 37 percent less than the median for single-family houses, $459,500.

Buyers who purchased at those median prices, making a 10 percent down payment and paying the current 6.63 percent interest rate, would have a $1,649 monthly condo mortgage payment compared with a $2,649 house payment.

The mortgage payment does not include monthly dues for condo owners of several hundred dollars.

The total payment (mortgage + tax + insurance) on my single-family house is $1,250. In what world was $1,649 + $150 (or more) in HOA dues ever considered “a solution to the housing-affordability problem”?

As it turns out, the best (and only real) solution to “the housing-affordability problem” is lower prices. Go figure.

The purpose of our Friday Flashback series is to remind people why it’s never a good idea to base your home purchase decisions on the word of someone with a vested financial interest in selling as many homes as possible for as much as possible, no matter what. If you’ve got a good example of local home salespeople or other industry shills on record making fools of themselves in the years before the bubble burst, shoot me an email.
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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

16 comments:

  1. 1

    We Don’t Need Reality Tim

    We have “paid-off” hacks on CNN/Fox/etc getting CEO pay [Anderson Cooper makes $6M/yr], let alone our Dem/Rep politicians, to sooth us [brainwash?] into believing that the top 10% of household incomes is really Middle Class…..its alright, we’re all really rich anyway….

    The Wall Street Crooks are smiling at the alleged low[?] $2000/mo costs for Seattle condos.

  2. 2
    CCG says:

    “As it turns out, the best (and only real) solution to ‘the housing-affordability problem’ is lower prices.”

    Hear, hear. Was always funny to listen to the mafia’s unctuous concern about the affordability problem though. We have to help those poor, godless, filthy renters find a house…as long as it doesn’t cut into our loot.

  3. 3
    tomtom says:

    The Florera near Green Lake only sold 14 of its 59 condos, the last in July ’08.

    Unless you count this year’s foreclosure.

  4. 4
    Scotsman says:

    From the 60-01 days in Redmond:

    “Condo in Redmondo” Those were the days.

    If you bought new, you’re looking good, unless there was a HELOC to buy that boat. Ouch! Double whammy!

    I’ve never understood condos. Maybe it’s my total fear of HOAs and a lack of control over costs, present and future. I will never even look at one.

  5. 5
    Lake Hills Renter says:

    Looks like the market provided a different “solution to the housing-affordability problem”. Namely, lower prices.

    EDIT: Heh, posted this before I saw Tim’s last line.

  6. 6
    me says:

    People buying condos are simply scary. I am paying a total of <$800 in rent, including utilities. I'd simply love to buy a house or a condo that has interest + taxes + utilities + upkeep/hoa at the same price level. There's just nothing there.

  7. 7

    I was sort of expecting condos to fall first, before SFR, back then. That’s because that’s what happened in the early 80s. History though doesn’t repeat itself, which is an important lesson to learn (especially when you’re comparing the history of say the U.S. and Japan).

    I still don’t fully understand why the condo market held up so well at first. I suspect it was some change in the mix, but I don’t really care enough to figure that out (especially at this point in time).

  8. 8
    Scotsman says:

    Median wages/pay have fallen back to 1999 levels. Home prices to follow. Low interest rates are the only thing keeping the market alive. Condos, women, and children hardest hit.

    http://blogs.reuters.com/david-cay-johnston/2011/10/19/first-look-at-us-pay-data-its-awful/

  9. 9
    Ray Pepper says:

    Condos? You must be kidding…..As I say at the Trustee Sales…You can give me one for FREE and its a high possibility I WONT take it….Between the ever increasing dues, assessments, taxes, insurance, homeowners meetings and all the BS you have to put up with from the Association and hearing neighbors in too close of proximity all night long:

    http://www.youtube.com/watch?v=ZA4QkazsY_8&feature=related

  10. 10
    Jonness says:

    By Kary L. Krismer @ 7:

    History though doesn’t repeat itself, which is an important lesson to learn (especially when you’re comparing the history of say the U.S. and Japan).

    According to Edmond Burke, “those who don’t know history are doomed to repeat it.”

    https://seattlebubble.com/blog/wp-content/uploads/2011/09/Japanese-US-Housing-Bubbles_2011.png

    I agree the U.S. and Japan are apples and oranges, but I’ve learned a lot from the Japanese economy, which has factored heavily into my continued successful predictions that the overall trend in the Seattle housing market is lower prices.

    That being said, the extremely low interest rates appear to be exerting an upward, albeit temporary, effect on prices. But volatile price shifts in this market should be expected. As we head into winter, we will most likely reach a new low. I don’t expect a rapid descent from here unless we get something like a big European shock. Otherwise, as in Japan, we will continue to experience slowmo descent as the banks try to clean up their mess. Once we get through that, we can start trending up again.

  11. 11

    By Jonness @ 10:

    By Kary L. Krismer @ 7:

    History though doesn’t repeat itself, which is an important lesson to learn (especially when you’re comparing the history of say the U.S. and Japan).

    According to Edmond Burke, “those who don’t know history are doomed to repeat it.”

    https://seattlebubble.com/blog/wp-content/uploads/2011/09/Japanese-US-Housing-Bubbles_2011.png

    I agree the U.S. and Japan are apples and oranges,

    I’m not saying it’s good to be ignorant of the past–just not to expect the same thing to happen.

    I remember right before the second gulf war listening to all the retired general experts predict how the war was going to start, based on how the last one started. I think the Iraqis might have made the same mistake.

  12. 12
    Jonness says:

    By Kary L. Krismer @ 11:

    I’m not saying it’s good to be ignorant of the past–just not to expect the same thing to happen.

    I agree with that, especially when trying to predict market outcomes. A common mistake people make is to find a way to make money in a particular market and then extrapolate it out forever. A good example is the house flippers who continued to leverage right up until the market turned, and then they went bankrupt. As soon as life begins to get comfortable (too easy) it’s time to try to figure out how to adjust for the looming train wreck ahead.

  13. 13
    Scotsman says:

    Article in today’s (10-23-2010) Seattle Times about how changing standards for FHA loans and others on condos is/will be hurting marketability- i.e. prices likely to fall even further. Sorry, no link, but it’s another straw on the donkey’s back as they say. . .

  14. 14

    RE: Scotsman @ 13 – That was a Harney article, and he’s typically on top of things, but I didn’t quite follow what he thought was new. The approval process for condos changed over two years ago, as I wrote about back then.

    http://blog.seattlepi.com/realestate/2009/09/23/new-fha-rules-may-affect-condo-valuations/

    But yes, tougher standards has made things much tougher in some condos. PMI is more difficult, FHA might be impossible, both mainly because of the obvious–some condo associations are poorly run so a lender wants some sort of assurances.

    I’ll have to go back and read Harney again, and maybe just check out how many condos still have an approved status with FHA.

  15. 15
    Dirty Renter says:

    RE: Jonness @ 10
    I always thought it was Santayana.

  16. 16
    John Bailo says:

    Recent stats:

    1. Bicycle traffic down
    2. Car traffic per person down
    3. Apartment vacancies up
    4. Shortage of workers for apple picking

    While every explanation under the sun has been given for these facts the most obvious, to me, is that Seattle has been experiencing a net loss of population.

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