Get Rid Of Condo Special Assessments Once and For All
Categories: Finance, For Buyers, Hoboken New Construction
What’s the Maintenance Fee?
It’s interesting that when shopping for condos with buyers, the buyers are always attracted to condos with low maintenance fees. What is not often considered, is that maintenance fees can be too low. What does that mean? Well, the maintenance fee should be high enough to fund the ongoing operating expenses of running the condo (things like the management fee, if professionally managed, insurance, utilities for the common area, cleaning the common areas, etc.). In addition, there should be some ‘left over’ each month to fund the condo’s capital account which is used for long term improvements and repairs. This account is for items with a long useful life, like the roof, heating system for the building, elevator, brick face and so on.
Let’s Make Up a Budget
Often times, when a condo is built, the developer, in order to make the property seem more attractive and easier to market, sets the maintenance artificially low. Since there is no history, the budget is just made up. There are no past year actual figures to use in order to have a realistic budget. The building is ‘transitioned’ to the unit owners when the developer no longer has a controlling interest in the condo. The transition is supposed to happen soon after the majority of the units are sold and a new condo board elected. At that time, the new board ought to look very carefully at the proposed budget and make adjustments where needed. Having maintenance fees set too low will usually result in a deficit in the future. Without an adequate reserve fund, special assessments are required to pay for building operations and repairs. Most owners prefer to know what their monthly obligations will be and don’t appreciate getting hit with an unexpected assessment.
Show Me The Money
When a condo is sold, the buyer has the right to see the financials of the condo association. The buyer’s attorney should review these documents on the buyers behalf to see if the building is in good financial standing. Sellers of units that are in condo associations where the numbers are good, meaning there is an adequate budget and decent reserve fund, should let potential buyers know that.
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Interest Rates Fall - Demand for Home Mortgage Surges
Categories: Finance, For Buyers, For Sellers
Mortgage Demand Hit 4 Year High Last Week
Rueters reported that according to the Mortgage Bankers Association, the seasonally adjusted index of mortgage applications, which includes both purchases and refinances, increased 28.4%. The index ended this week the hightest its been since April of 2004.
The interest on a 30 year fixed rate home mortgage for a primary residence is down to a nationwide averate of 5.62%. It has not been that low since July 1, 2005 when it was at 5.58%. A year ago, it was 6.19%.
Compared to last year, mortgage applications were up 35.9% last week.
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Bull vs. Bear - What Do the Experts Say About Real Estate and the Economy?
Categories: Finance, For Buyers, For Sellers, Market Analysis
Industry Experts Speak on the Market and Economy
Today I had the pleasure to attend the Inman News sponsored Real Estate Connect ‘08 NYC in Manhattan. It’s a three day conference on the real estate market and real estate marketing. Many movers and shakers in the real estate world were panelists. Everyone from Craig Newmark, founder of craigslist to the folks from zillow, industry leaders like Dottie Herman, head of Prudential Douglas Elliman, Pamela Liebman of Corcoran and Economics Professor Nuriel Roubini of NYU’s Stern School of Business spoke on various topics. Of course, the hot topic was what’s going on in the real estate market and the economy.
The Worst is Yet to Come
The most bearish of the bunch was Prof. Roubini. He claims we’re in for a monsterous recession (his words) and mentioned some pretty disturbing figures. He said that if the U.S. housing market were to lose 30% of it’s value that would mean a 6 trillion dollar hit for the economy. In his view, the worst is yet to come. The panelists agreed unanimously that the credit crisis was a result of lax regulation which led to too easy money which caused inflation in housing prices. The continued shifting of credit risk to the next guy while everyone along the food chain made big money in fees was also a factor in the credit market implosion.
NYC Still a Bargain - But What About Hoboken?
The bull in the group was Dottie Herman, who pointed out that the combination of the weak dollar, lots of weathy buyers and New York City’s allure as a destination for foreign buyers was keeping the local market on an even keel. She did note that location becomes even more important at times like these.
What do you think? Is our local economy doing well enough to support current housing prices here in Hoboken? Stay tuned for more interesting insights from tomorrow’s events.
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Don’t Believe What You Read - 2007 Hoboken Condo Sales Beat 2006 by All Measures
Categories: Finance, For Buyers, For Sellers, Hoboken Real Estate News, Market Analysis
Here are the facts. All numbers based on the full year. First figure represents 2007 - second figure represents 2006.
Number of Listings: 1,598 vs. 1,755
Number of Sales: 972 vs. 866
Average Asking Price: $534,088 vs. $527,679
Average Sales Price: $523,303 vs. $517,151
Discount off List ($): $10,785 vs. $10,528
Discount off List (%): 2.02% vs. 2.00%
Average Size: 989 sq. ft. vs. 1,001 sq. ft.
Average $ per Sq. Ft. $529 vs. $517
Median Sales Price: $500,000 vs. $487,750
High Sold Price: $2,350,000 vs. $1,450,000
Low Sold Price: $173,000 vs. $155,000
Total Listed: $519,133,881 vs. $456,970,460
Total Sold: $508,651,429 vs. $447,853,354
*All number are based on MLS listings and do not include for sale by owner or developer (pre-construction) transactions.
And for more good news, Artie Lange of the Howard Stern Show said on the show today that he would like to open a comedy club here and call it “HoJokin”.
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Absorption Rate - What it Means and Why You Need to Know It
Categories: Finance, For Buyers, For Sellers, Market Analysis
Absorption rate is a measure of supply. It gives us a way to calculate how long it would take to sell all the units currently for sale. It helps both buyers and sellers understand what’s going on in the market.
Most sellers, when pricing their own property, look to see what their neighbors got for their place. What that doesn’t tell them, however, is how saturated the market is with other properties for sale at the time that they want to sell. Absorption rate is a way to judge how much supply is out there against which, you, as a seller, are competing.
Absorption rate is important to buyers, too. If you are a buyer in a market with lots of inventory - guess what - you will have a better chance at negotiating a lower price. Basic economics teaches us that prices in any free market are determined by supply and demand. If demand is constant, an increased supply means prices will drop to restore balance in the market. When there is not much supply, buyers pay more to get the scarce item.
This is how absorption rate of Hoboken condo units would be calculated:
Take the number of properties that have actually sold over a period of one year. As a Realtor, I can pull this data right from the MLS. Take the total number of condos sold in the past year. Divide that number by 12 to get a monthly figure . Divide the number of properties actively for sale this month by the result and you get the absorption rate. It tells us how many months it should take to “sell out” all of the properties currently for sale. In our case, it should take just over five months for the market to “absorb” all of our current inventory.
Condo units listed on the MLS sold in the past year: 530
Monthly figure: 82
Active condos today: 530
Absorption Rate = 5.4
According to the National Association of Realtors, six months supply is considered a balanced market. That indicates that the number of listings, or properties for sale roughly equals the number of buyers. A number over six represents a buyer’s market and a number under 6 a seller’s market. We can also look at absorption rate by price range or by unit size. Here is an example:
studios and one bedroom units: 384 sold, 136 active = 4.25 absorption rate
two bedroom units: 515 sold, 243 active = 5.6 absorption rate
three bedrooms and bigger: 87 sold, 61 active = 8.7 absorption rate
Good news for one bedroom sellers. Good news for two bedroom sellers. But bad news for the sellers of the big units. This may seem counterintuitive to the demographics of the Hoboken condo market. We all see lots of strollers on Washington Street and the parks are full of kids. You would think there would be a huge demand for the bigger units to house our growing number of families. Keep in mind, however, that we looked only at condos so all those uptown brownstones are not included in the above analysis. Another thing to remember, is that all these figures come from the MLS. The huge, new projects, like Maxwell Place, are mostly not listed or sold on the MLS so they’re not included in this study. It would be interesting to see how the increase in supply thanks to Maxwell and all the other new construction around town that is sold directly by the developer, would impact the absorption rate. My guess is that the 5.6 and 8.7 numbers would be a bit higher, due to the added inventory.
It is also possible, using absorption rate, to look at sales trends over time. If you calculate supply over any number of three or six month periods you will get an indication which way the market is trending. Like other industries, real estate prices are mostly a matter of supply and demand. While absorption rate may just be a guide, it is another valuable tool for buyers and sellers to better understand the real estate market and assist them to make informed decisions.
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