• Economic Considerations in Buying a Condo or Townhouse

    Date: 2011.12.16 | Category: House & Home | Tags: ,,,

    Considerations Economic Considerations in Buying a Condo or TownhouseIf you’re graduating from downtrodden tenant to your first home by buying a condo or townhouse, there are three economic considerations that you should keep in mind as you shop around. First, in a mixed area with single-family homes, condos and townhouses will not appreciate as fast as single-family homes will in a normal market.

    In slow economic times, the condo and townhouse markets often suffer first and are slower to recover. However, in urban areas competition with detached houses often doesn’t exist, so normal supply-anddemand economics govern values.

    Second, condos can be more area sensitive than detached homes. If a project becomes run down or the area suffers because a freeway off ramp or factory is built nearby, values can sink to the bottom and stay there longer than areas with single homes.

    Think ‘‘sell’’ when you buy. Many first-time homebuyers visit new condo or townhouse developments that advertise a fun lifestyle and an owning-is-cheaper-than-rent sales pitch along with attractive financing packages.

    These homebuyers don’t think about what will happen when all the units are sold, the developer moves on, and the project becomes part of real-world economics. If you plan on moving within a few years, you’ll want to consider the following questions:

    Will the property hold or increase its value in the short term?

    Are there similar projects in the area and, if so, have their values increased or decreased?

    What percentage of the units are owned vs. rented?