Most of you probably have an idea or at least a decent understanding of what constitutes a condominium, but just in case I will try to clarify it a little bit. In general, a condominium is a unit or space that can be purchased inside a larger building. When a person owns a condo they have exclusive ownership of a specific space or unit inside a building while also owning a small percentage or shared ownership in the rest of the building. All the owners in a condominium share in the cost or upkeep of the entire building or complex. For example, condo owners pay HOA fees that cover building insurance, maintenance, and often the cost of amenities. They can be attractive real estate because they are often more affordable than traditional homes, they offer low maintenance, and are often ideal second home purchases. Nevertheless, many condo owners are suffering due to the recent recession. In many areas condo values have dropped drastically, and while most real estate has appreciated in Athens not every condo development has recovered. In fact, many areas are still close to the values of 2011. On the other hand, certain developments have seen values grow back quickly. So why have some condos appreciated while others have not? To understand why you have to go back to the recession.
Hopefully, you haven’t forgotten what happened eight years ago. The mortgage crisis devastated our national economy resulting with a sharp decline in real estate values. We saw massive foreclosures across the country, and condos were a major part of the foreclosure market. First, you have to understand that many condos are developed to be vacation or second homes. For instance, many coastal areas are covered with condo developments that are owned by people that do not occupy the units full time. And if someone owns two properties when money becomes tight, the second home is usually the first thing they can live without. As a result, numerous condos went on the market in 2010 when most people could not afford to buy them or were scared to buy due to the recession. Consequently, property values plummeted, and many homeowners had to let their condo go into foreclosure. Banks across the county took massive losses on condos, and now many large banks will not finance a condo. And that’s the problem many condo owners face today. The financing has become more difficult which shrinks the pool of buyers resulting in depressed values. Here in Athens, we have some condos appreciating and others that are not. So back to the question, Why?
The answer is simple, and it is almost always the same LOCATION, LOCATION, LOCATION. You may think I am beating a dead horse, but it is the truth. All properties are valued based on their location, but condo values are even more dependent on the location. As an example, look at downtown Athens where many condos have appreciated over the last couple of years because downtown Athens is a prime location where many condo buyers are looking to purchase. Meanwhile, the east side of town has an abundance of condos that are valued much less due to location and the overall supply. For instance, on Barnett Shoals road there are four large condo developments: The Woodlands, The Summit, Stones Creek, and Brookwood Mill. All of these developments were originally targeted to investors or parents of UGA students. They are well built, spacious, and fairly close to campus. However, the supply greatly exceeds the demand keeping the prices low around $100,000. Conversely, condos at Lumpkin Square or East Cloverhurst are worth around $150,000 for a smaller and older two bedroom unit. These condos are worth more because they are right next to campus and walkable to restaurants and Sanford Stadium.
So does this mean you should not buy a condo? Heavens no! Condos are still a very good purchase depending on the price, the location, and the purpose. The values on the eastside of town offer a really low price point for investment. In some cases, buyers can still purchase a three bedroom condo in the low $100s. And remember, a condo in an ideal location will always have value. Additionally, we are starting to see condo financing improve, and I believe it will continue to get better over the next couple of years. In closing, if you have a condo to sell or are looking to buy one don’t worry because either is very doable. But I suggest you find someone in the area that really knows their stuff because you will need help to navigate the market and the current financing climate.