Anyone who owns a home or condo in downtown Phoenix knows the condo market has been a bit dreadful this past year. High end developments like 44 Monroe found their buyer pool vanished, Summit at Copper Square has made the news with judgments, liens and foreclosure problems, and Orpheum Lofts saw values plummet like a rock off a high cliff.
The good news is condo prices have fallen to a point of true attractiveness for many buyers. Recent sales, October 2009 to December 15th, demonstrate buyers are willing, perhaps even delighted to buy the now low priced units.
The key to purchasing condos appears to be cash. Of the 61 units sold since October 1st 2009, 38 were cash buyers, 17 conventional loans and only 6 with FHA financing.
Financing of units is a real problem. The Federal Housing Administration put forth lending guidelines that limit a person's ability to obtain FHA and, in many cases, conventional loan financing. Loans for higher end properties, AKA jumbo loans, have had trouble finding investors to buy the paper making luxury units difficult to sell to non-cash buyers.
HOA issues are a concern as well. Many are underfunded and have a fair amount of debt on the books. It's not uncommon for homeowners to put their HOA dues at the bottom of the bills pile.
Based on ARMLS sales data, it appears that Brink Commons, Downtown Phoenix Lofts and Regency House had sales in the past 2.5 months involving FHA financing. Tapestry, Portland 38, Mezzo and Stella all show conventional loan financed sales.
The big sales winners, according to ARMLS, for the last part of 2009 are:
- Brick Commons -- 6 units
- Landmark on Central -- 5 units
- Cambridge Manor -- 5 units
- Hawthorn Condominiums -- 5 units
- Tapestry on Central -- 4 units
- Windsor Place -- 4 units
- Portland 38 -- 3 units
- Mezzo -- 2 units (they tell me they only have one of these Will Bruder design homes left.)
Conclusions:
We are still a bit worried about the future of condo prices. Some have come so low that even a 10-15 percent drop won't cut too deep into a homeowners pocket. However, in developments that do not qualify for conventional or FHA funding the buyer pool (demand) is limited and low demand usually indicates a fall in values.
We also advise taking a detailed look at the heath of the HOA. Are there issues that may invoke a special assessment? Read the minutes of the HOA meetings to see what has been discussed. Find out how many homeowners are behind on their payments. Take a look at their reserve funds to make sure they have the money to keep the complex in good repair. The bottom line is CYA when it comes to HOA's.
If you buy right in a well managed property, you may find yourself a very happy camper a few years down the line when downtown Phoenix is booming.
Gene Urban
The Urban Team at Realty Executives
602-234-5777
