Condominium living has been enjoyed and expanded for many decades in the US but ownership for many condominium complexes may becoming unnecessarily risky for present homeowners and new Buyers alike.
Condominiums with less than the required owner occupancy and association reserve standards have always been a bit a tenuous from the financing perspective. But with the housing downturn and the added number of defaults on mortgages as well as the required association dues for proper operation and maintenance, meeting the new FHA criteria for financing is becoming a major new housing issue.
The new FHA rules and certification process is leaving many homeowners unable to refinance as well as being able to sell their property. This new action will most likely continue to take a toll on condominium property values. And we continue to see more of these properties coming on the market in the distressed property category and that is exacerbating the financing options issue even more. While investors are interested in these distressed properties, they continue to erode the owner occupancy ratio and complicate refinancing and the ability to sell for the remaining homeowners.
Condominiums have provided a wonderful way for entry level home ownership, while in other areas, they have provided for a more luxurious lifestyle and were priced accordingly. The troubling financing issues have mostly been associated with the entry level buyers or at least less than the deluxe condominium developments with buyers less affected by conventional financing options but in some areas these entry level complexes make up the majority of the condominium offerings. And with property values still eroding in many areas of the country, these financing issues are expanding even into some of the more upscale subdivisions.
This financing issue which could easily reach a level of critical mass needs a solution or it will expand to affect millions more of the 8.5 million condominium homeowners. And there is no easy known solution but one must be found lest this type of housing become unsuitable for entry level purchasing because they can not be easily financed, sold or even refinanced, limiting the affordable alternatives for many entry level home buyers.