Fsbo

Don’t let the surge in prices fool you: The condo craze is all bubble. Worse, living in a condo can be maddeningly complex — and costly.

Any time speculators tell you that things are different this time, you should beware.

Yet that’s exactly what some investors and experts are saying about the condominium market. They insist the wild upsurge in condo prices can be attributed to changing demographics.

Don’t you believe it. This is the tech-stock bubble all over again. Consider:

• Condo builders are on overdrive. About 800,000 condo units were built between 2000 and 2004, and 525,000 between 2005 and 2006. Regulators and rating agencies have expressed concerns about potential overbuilding in several markets, including Las Vegas and Miami, as speculators snap up new units in hopes of flipping them for quick profits.

• Condo conversions are running amok. In 2003, investors bought about $3 billion worth of apartment units for conversion to condos. A year later, that volume had soared to $13.3 billion, a 350% increase in 12 months. Another $7 billion was snapped up in the first six months of 2004. The pace is so frenetic that Fitch Ratings predicts widespread defaults in the next three to five years as inexperienced investors combine with oversaturated markets to devastate many projects.

• Price increases are losing momentum. It was big news when median condo prices outstripped those of single-family homes for the first time. But after four years of double-digit gains, the rise in condo prices recently slowed dramatically while single-family home values continued to charge ahead.

This entry was posted on Thursday, May 29th, 2008 at 7:39 am and is filed under FSBO. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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