The first S&P Case/Schiller Housing Index for Condos has just been released. The Case/Shiller Index is a constant quality index measuring the changes in value of homes over time. Previously, these indices tracked price movements of single family homes only.
Condos are affected by different market forces and appeal to a different segment of the population. Young professionals and the elderly often find community living preferable. Maintenance issues are often taken care of by a management team while community pools, tennis courts, basketball courts, and a clubhouse are often provided.
However, these amenities come at a price, as discussed in previous posts. During the housing boom, developers were building condos at a rapid pace. Now that the economy has slowed dramatically, condo sales have stagnated as buyers conserve cash and are not as willing to pay monthly condo fees. With restrictive association bylaws, it is difficult for condos to differentiate themselves between other units in the same community, driving prices further down and creating a cascade effect.
It will be interesting to see how effective the S&P Case/Shiller Index is at tracking condo price movement. In metro areas, valuation can differ substantially as market forces change within a city block. In areas where land is quite affordable, enormous condo communities have been created, sometimes without sufficient supporting infrastructure and area business. Tracking renovations and new construction raises several other issues as well. That being said, this index remains a great tool to gauge the broad market.
Any questions or for FREE customized Market Reports, automatic email updates on properties that fit your criteria, or Realtor Referrals, please EMAIL ME or call me at 734-478-9270. -Anwell Tsai
Monday, November 24, 2008
Tuesday, November 18, 2008
Foreclosures and Short Sales
Typically, Real Estate markets have been dominated by homes sold between people who have relocated, have children and need more space, or have a desire to upgrade/downsize. For many obvious reasons, short sales and foreclosures have now become a much more significant part of the market.
As their influence in affecting market values continues to grow, I wonder how various housing indices track their effect. Constant quality indices such as the S & P’s Case/Shiller and OFHEO use sophisticated methodology to ensure more accurate reporting of housing data.
The main premise behind these indices is that they track the price fluctuations of homes of similar quality and condition. Foreclosed homes often have been abused by disgruntled home owners who have lost jobs and their primary residence. It is not unusual to see foreclosed property greatly damaged. How do these indices take into out changes in conditions? How do they ensure that these sales do indeed reflect a constant quality and at arm’s length transaction?
Monday, November 10, 2008
Fiduciary Duties
People often question the motives of Realtors. It makes sense. Realtors receive a commission based on the selling price of a home. I think it’s reasonable to assume that they might influence you to purchase a home which they can earn a higher commission, or sell a home at a lower price in order to induce a quicker sale.
However, Real Estate is a regulated business. State law with regards to fiduciary duties dictate that agents must put their clients interests ahead of their own. A car salesman, some financial consultants, and other businesses do NOT have a fiduciary relationship with their client and can profit from them. Realtors who profit at the expense of their client commit fraud and are subject to severe penalties.
Realtors work primarily through referrals. They want to build a solid relationship with you so that they can earn your business this year, gain referrals for friends and family that may purchase homes in the upcoming years, and work again with you when you move out. It makes sense both from a moral, legal, and economic point of view to do everything in their power to help their client.
Any questions or for FREE customized Market Reports, automatic email updates on properties that fit your criteria, or Realtor Referrals, please EMAIL ME or call me at 734-478-9270. -Anwell Tsai
However, Real Estate is a regulated business. State law with regards to fiduciary duties dictate that agents must put their clients interests ahead of their own. A car salesman, some financial consultants, and other businesses do NOT have a fiduciary relationship with their client and can profit from them. Realtors who profit at the expense of their client commit fraud and are subject to severe penalties.
Realtors work primarily through referrals. They want to build a solid relationship with you so that they can earn your business this year, gain referrals for friends and family that may purchase homes in the upcoming years, and work again with you when you move out. It makes sense both from a moral, legal, and economic point of view to do everything in their power to help their client.
Any questions or for FREE customized Market Reports, automatic email updates on properties that fit your criteria, or Realtor Referrals, please EMAIL ME or call me at 734-478-9270. -Anwell Tsai
Monday, November 3, 2008
Critical differences between condos, co-ops, and single family houses
Three homes are for sale, each for $250,000. A fee simple house has only 2 bedrooms and is outdated. A Condo is newer with a swimming pool and an extra study room. A co-op was built just last year and has 4 bedrooms with a bevy of amenities (pool, sauna, workout room, and clubhouse). Which one should you choose?
That depends entirely on the rights that are being conveyed, tempered by individual and market preferences. People often make the mistake of comparing the physical attributes of property before taking full consideration of the property rights, leading to sometimes unfortunate and expensive mistakes.
Technically speaking, condo owners own a fee simple estate for the air lot or space between the walls and floor of their unit and have in undivided interest in the common area with tenancy in common rights. In a co-op, owners hold stock in the corporation and are leased property. They do not hold a fee simple interest and therefore can be imposed under more restrictive policies than in a condo.
By comparison, owners of a fee simple house are restricted only by the police powers of the government and taxes. In a co-op, in order to purchase, sell or rent your interest, you will need to be approved by the corporation. This can be extremely restrictive, which is why prices for co-ops are considerably lower.
The perceived degree of these limitations determines the amount of discount that is appropriate. When comparing properties with different rights being sold, it is critical that you adjust accordingly. In important thing to remember, a co-op even with extremely relaxed rules, can always change its policies as determined by its board.
Any questions or for FREE customized Market Reports, automatic email updates on properties that fit your criteria, or Realtor Referrals, please EMAIL ME or call me at 734-478-9270. -Anwell Tsai
That depends entirely on the rights that are being conveyed, tempered by individual and market preferences. People often make the mistake of comparing the physical attributes of property before taking full consideration of the property rights, leading to sometimes unfortunate and expensive mistakes.
Technically speaking, condo owners own a fee simple estate for the air lot or space between the walls and floor of their unit and have in undivided interest in the common area with tenancy in common rights. In a co-op, owners hold stock in the corporation and are leased property. They do not hold a fee simple interest and therefore can be imposed under more restrictive policies than in a condo.
By comparison, owners of a fee simple house are restricted only by the police powers of the government and taxes. In a co-op, in order to purchase, sell or rent your interest, you will need to be approved by the corporation. This can be extremely restrictive, which is why prices for co-ops are considerably lower.
The perceived degree of these limitations determines the amount of discount that is appropriate. When comparing properties with different rights being sold, it is critical that you adjust accordingly. In important thing to remember, a co-op even with extremely relaxed rules, can always change its policies as determined by its board.
Any questions or for FREE customized Market Reports, automatic email updates on properties that fit your criteria, or Realtor Referrals, please EMAIL ME or call me at 734-478-9270. -Anwell Tsai
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