Condo Values Rising Fast In 5 Major Metros

The Newsdesk
The Mortgage Reports contributor

Do Condos Appreciate Faster Than “Homes”?

Values for U.S. condominiums are rising faster than values for single-family homes.

According to the Case-Shiller Index, a national tracker of home values, July 2016 price growth was higher among condos than detached residences, in general, with stark differences in New York City and Boston.

Today's mortgage rates are low, which helps to keep condos affordable, but the shift has put a squeeze on first-time buyers.

First-time home buyers are more likely to buy in big cities where condos are most prevalent, and a condo building’s relatively-low price point as compared to “city homes” renders them an attractive option for city living.

Even considering HOA dues, a condo could yield a greater return-on-investment than a single-family home.

Today’s 30-year mortgage rates are near the lowest they’ve been in history. Mortgage payments on today’s homes are affordable, thanks to low rates of interest, and, in turn, low payments.

Verify your new rate (Feb 24th, 2020).

New York Condo Values Rising Quickest

The most recent Case-Shiller Index shows U.S. home values up 5 percent for the twelve months ending July 2016. The results are based on the Case-Shiller Index’s 20-City Composite.

Monthly gains were led by Portland, Oregon (1.2%); Chicago, Illinois (0.9%); and, Denver, Colorado (0.9%).

San Francisco, in which values were unchanged month-over-month, was the national laggard.

In terms of price growth from one year ago, all twenty tracked cities posted gains. Portland, Seattle, and Denver, Colorado were the top three gainers. The cities showed 12.4%, 11.2%, and 9.4% growth, respectively.

Of 20 cities, New York showed the slowest growth, up 1.7% from one year ago. This is noteworthy because the New York City housing market — a market which includes Manhattan, Brooklyn, Queens, the Bronx, and Staten Island — is considered to be one of the country’s hottest.

So why does a “hot” market show such anemic annual growth? Because of the Case-Shiller Index’s methodology.

The Case-Shiller Index tracks single-family home sales only and the New York market is more of a “condo” market.

In New York City, housing stock is over-weighted with condominiums and co-ops — housing types which the Case-Shiller Index ignores in its primary market index.

In New York, condo values are up 4.7% from last year — nearly triple the increase for the city’s single-family homes.

The difference between condos and single-family homes is present within Case-Shiller Index-tracked cities, too:

  • Los Angeles, California : +1.1 percentage point improvement for condos
  • San Francisco, California : -2.0  percentage point improvement for condos
  • Chicago, Illinois : Condos : +0.1 percentage point improvement for condos
  • Boston, Massachusetts : +3.7 percentage point improvement for condos
  • New York City, New York : +3.0 percentage point improvement for condos

Condo home price growth in increasing relative to growth among single-family homes in many U.S. cities, and values overall continue to climb.

Home values have recovered all of last decade’s losses, non-adjusted for inflation.

Meanwhile, as home values have climbed, mortgage rates have dropped.

The average 30-year fixed rate mortgage continues its 13-week run at or below 3.5%, with lenders quoting low rates and APRs. For homeowners choosing VA mortgage rates, mortgage costs are even lower.

VA mortgage rates currently beat conventional rates by 25 basis points (0.25%) or more, and VA mortgages never require mortgage insurance.

Verify your new rate (Feb 24th, 2020)

Mortgages For Condominiums And Co-Ops

Getting a condo mortgage can sometimes be a challenge.

Remember that, last decade, condo lending burned lenders for hundreds of millions in losses. Today’s lenders, therefore, are a bit more cautious. They carefully review what they’ll lend, to whom, and in which condo building.

Condos buyers have fewer mortgage choices as compared to single-family home buyers. They sometimes pay higher costs, too.

As one example, buyers using a conventional mortgage via Fannie Mae or Freddie Mac pay extra fees on a condo loan when the downpayment is less than 25%. There may be other costs assessed as well, simply for buying a condo.

Buyers who have VA-eligibility, though, can use VA loans for condos.

VA loans allow 100% financing in condos with no mortgage insurance required.

Mortgage rates tend to be relatively low with a VA loan because all VA loans are guaranteed by the government.

However, your condo building’s warrantability will be verified before your loan is approved.  The same is true for FHA approved condos.

“Warrantability” is a mortgage term which describes whether loans in a given condo building are eligible for purchase by a government agency such as the VA, the Federal Housing Administration (FHA), or Fannie Mae and Freddie Mac.

Buildings filled with “non-warrantable condos” are typically turned down for funding, but not always.

A building’s warrantability is based on a host of traits, some of which include :

  1. No person owns more than 10% of the building units
  2. No more than 50% of the building’s units are active rental units
  3. No more than 20% of the building is dedicated to commercial/retail space

To determine whether a building is warrantable or non-warrantable, mortgage lenders will often use a “condominium questionnaire” which delves into the building’s structural, legal, management, and financial details.

Non-warrantable condos can still be financed, it should be mentioned. Product availability remains limited, though, and mortgage rates are sometimes higher.

What Are Today’s Mortgage Rates?

The Case-Shiller Index reports rising condo values and, in many cities, condo prices are rising faster than prices for detached, single-family homes.

Get today’s live mortgage rates now. Your social security number is not required to get started, and all quotes come with access to your live mortgage credit scores.