Condominium Ownership Is Becoming the American Nightmare
Many homeowners who have bought into the American dream by purchasing a condominium are now regretting that decision, as some find themselves unable to sell or rent their units, while others face court battles with investors trying to force them out of their homes.
Condo boom gone bust
Like other types of housing, condos experienced buyer popularity during the housing boom. But the housing crash put an end to that party, too, and numerous condominium owners are still being negatively affected by the housing crisis. Many are finding themselves stuck as stringent lending regulations make selling nearly impossible - even as condo rules stop them from renting their homes as a stopgap measure.
Part of the problem concerns changes made by the Federal Housing Administration over the past few years. In an effort to protect taxpayers from risk, the FHA has tightened condo lending rules to the point where obtaining a mortgage for such a purchase is almost impossible.
Because the FHA rules apply to the entire development, even buyers who would qualify for such a loan won't be able to get one. FHA loans are often used by first-time homebuyers, a group particularly apt to buy less-expensive condo units as a starter home. Though other types of credit are available, these potential buyers may not qualify.
Some owners try to salvage their soured investment by renting their home, but often run afoul of condo board rules on the subject. Many developments only allow a certain percentage of units to be non-owner occupied, often because financing options will be much more restrictive for buyers if too many apartments are rented. But, that rule can backfire, essentially dampening prices in the entire complex when prospective buyers realize that they won't be able to rent their unit if the need arises. In addition, condo prices can be depressed if desperate owners need to sell the unit at fire-sale prices, just to be free of the problem.
Investors give owners the boot
In Florida, some condominium owners are suing a large group of investors who bought their condo building, and now want the individual unit owners out.
Madison Oaks was originally an apartment complex, but was turned into condos in the mid-2000s by developers looking to cash in on the southern Florida condo craze. Fewer than 20% of the units sold before the crash, while the rest became rentals. Now, an investor group has purchased the complex, and wants to turn it back into leased apartments.
With an 80% majority vote, they may be able to force the owners to sell at a loss. The owners paid high prices right before the mortgage meltdown, and condo prices tanked. Now, the rental market is booming, but the investors are offering the owners only a fraction of what they paid right before the crisis.
While the luxury condo market seems to be making a comeback, the owners of more affordable units seem stuck in limbo - or worse. For many of those who had hoped to use a condominium purchase as a starter or retirement home, the housing crisis continues - for some, seemingly without end.
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