What will happen to these condos? 2000 Central Ave #L, Alameda, CA
Earlier today I threatened to post more about recent condo listings, and here's one that has me wondering what is going to happen to a bunch of condos (not just in Alameda, everywhere, really) as the economy continues its unraveling and the real estate market reaches for ever deeper depths.
The unit at hand has the following specs:
The unit at hand has the following specs:
2 bedrooms, 1 bathroom, 864 sqft, MLS(r) #40392938, $284,900 ($336 / sqft)
Bank owned 2 bedroom 1 bath. Condo.
The kind of units I'm wondering about are the small, sub-1,000-sqft (or even sub-900-sqft), 1- or 2-bedroom condos that sold for grotesquely inflated prices between 2004 and 2008 and are (unsurprisingly) going back to the bank or being listed at a loss. I've written about several such examples on this blog.
Assuming a 10% down payment (although perhaps a widowed senior downsizing might have the 20% saved up), an average mortgage on this particular unit would cost you about $1,500 a month, plus probably $100-$250 in HOA dues, plus $200 in property tax (at least), plus insurance, etc. Let's round it up to $2,000 a month to live in that little cubby (a conservative estimate).
For perspective, my rent is considerably less than that, for a much larger unit in a lovely area within easy walking distance of the bay, with much more character and offering amenities of a much higher caliber than this property. And contrary to what real estate agents might tell you, the foreclosure glut is not actually causing rents to rise: the opposite is true. So the more time passes, the less buying a property like this for $275,000-$300,000 makes sense. As it stands, this property would have to sell for no more than $125,000-$150,000 to pencil out and compete with comparable rentals.
If you're an architecture buff or someone with special needs like a ceramic kiln or a giant carrot garden or what have you, I understand the pride-of-ownership, my-house-is-my-home thing has its own appeal beyond strictly financial considerations. But does that really apply to tiny cookie-cutter 1960s condos (which may even have been apartments in a former life) on a high-traffic thoroughfare?
And there's the rub: today's asking price of $284,900 is already 29% less than its previous sale price less than two years ago, and it's even less than the transaction before that (in real dollars):
A lot of sellers are already screaming blue murder when you make an offer at or 10% below their list price; what do you think they'd do if you offered 25% of their asking price? More importantly, (how) can the financial system handle losses of that magnitude?
Update 3/10/09: Down to $269,900.
Assuming a 10% down payment (although perhaps a widowed senior downsizing might have the 20% saved up), an average mortgage on this particular unit would cost you about $1,500 a month, plus probably $100-$250 in HOA dues, plus $200 in property tax (at least), plus insurance, etc. Let's round it up to $2,000 a month to live in that little cubby (a conservative estimate).
For perspective, my rent is considerably less than that, for a much larger unit in a lovely area within easy walking distance of the bay, with much more character and offering amenities of a much higher caliber than this property. And contrary to what real estate agents might tell you, the foreclosure glut is not actually causing rents to rise: the opposite is true. So the more time passes, the less buying a property like this for $275,000-$300,000 makes sense. As it stands, this property would have to sell for no more than $125,000-$150,000 to pencil out and compete with comparable rentals.
If you're an architecture buff or someone with special needs like a ceramic kiln or a giant carrot garden or what have you, I understand the pride-of-ownership, my-house-is-my-home thing has its own appeal beyond strictly financial considerations. But does that really apply to tiny cookie-cutter 1960s condos (which may even have been apartments in a former life) on a high-traffic thoroughfare?
And there's the rub: today's asking price of $284,900 is already 29% less than its previous sale price less than two years ago, and it's even less than the transaction before that (in real dollars):
Yet I submit it stilll needs a further 55% price cut before it makes sense for anybody to buy this property. That would amount to a 70-75% price cut from 2006-2007 prices, which in many cases means a 70-75% loss for the lender.Sales History
Sale History 10/31/2008: $227,435 * 05/22/2007: $399,000 05/09/2003: $265,000
A lot of sellers are already screaming blue murder when you make an offer at or 10% below their list price; what do you think they'd do if you offered 25% of their asking price? More importantly, (how) can the financial system handle losses of that magnitude?
Update 3/10/09: Down to $269,900.
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