“elaborate a bit more on why buying a condo is bad investment”
too many factors outside of my control – that is how I would summarize my opinion about putting hard-earned money into a condo
search the archives for “HOA” and you’ll find a host of issues that come along with your HOA – special assessments and non-paying members would be two issues to consider
do some research on the downtown condo market – unless it has changed dramatically, there is far more supply than demand – imagine being forced to sell a condo in a market of that type
“construction defect litigation” – this issue came about because of the poor quality of construction employed in attached housing units
you might check “condo conversions” in the archives as well – there are enough of these in San Diego that it is worthwhile understanding the related issues – quality of the underlying apartment being the primary factor
supply and demand – supply: lots of condos / attached housing, fewer single family residences (SFR) – demand: given the choice, most people prefer the lifestyle of an SFR over a condo
obvious: the mortgage industry sees condos as a less desirable investment which is why the 0.75% difference is being discussed here
lifestyle: in attached housing sound travels through the structure of the building – you get to hear your neighbors opening and closing doors, flushing toilets, walking across floors, talking near your windows, etc – again, given the choice, most people prefer the lifestyle of an SFR over a condo – point being to put your money into the more desirable asset (SFR) because it is more likely to hold its value during slow times and also likely to appreciate more and faster in good times
if a condo makes sense for you as a primary residence do it with eyes wide open – understand the issues going in, research the HOA, don’t close escrow without getting a copy of the current HOA reserve review
as an investor, all of the negative aspects of condos might eventually make them good investments – condos tend to take a disproportionate share of the overall decline (Rich’s charts show this already) – if the banks continue to dis-favor condo loans, condo prices should decline as a result – at the extreme, the banks would not issue ANY condo mortgages and the cash buyer would have a field day buying from forced sellers
