In the real world, 2006 is measured as five years ago. In the real estate world- where the conversion table often times resembles that of dog years- it is a lifetime ago – especially when reviewing the condo market.
Out of morbid curiosity, I spent some time this morning reviewing a building that- anecdotedly at least- seems to be one of the hardest hit projects in Atlanta. Built in 2006, it* arrived on the scene to great fanfare- it was the building, and buyers clamored to be a part of this splashy new tower. The party, sadly, has been dwarfed by the hangover.
There have already been 44 foreclosure units that have sold in the building, and there are an additional 30 units that are currently owned by lenders or are scheduled for auction. With a total of 381 units, this means that nearly 20% of the building’s units have or will be foreclosed on. Pretty astonishing when you consider that this doesn’t even factor in short sales.
What’s perhaps most shocking are the numbers. On March 8, a foreclosed unit sold for $70,000. This same unit was originally bought on April 21, 2006 for $228,700 which amounts to a 70% loss of value. Another recent sale- on February 7- went for $55,000. This unit originally sold five years prior, on February 8, 2006 for $233,700, a 77% loss of value.
This is obviously great news for buyers: At these prices, it’s impossible to find comparable rental properties that can match up. Crushing, however, not only for those that have been foreclosed on but also for those that are still living in the building, paying their mortgages on time. None of these residents had any inkling of how far the market would fall when they purchased their homes five years ago, and are now in possession of condominiums that may not come back above water for many years to come.
This is not an indictment on all condominiums, nor am I saying that all buildings have been as adversely affected by the downturn. On the contrary- with prices and interest rates where they are- it’s a great time to buy. It is, however, a call for future condo buyers to exercise caution and due diligence prior to making their purchase. Make sure that you’ve got a Realtor (preferably, me) representing you. Make sure said Realtor provides an extensive set of comparables so that you know what you’re buying. You’re buying more than four walls, a pool, and a gym: you’re also buying neighbors (and their potentially underwater mortgages).
* For now, the building in question shall remain nameless. If you’re curious, email me at jon (at) yourownsanctuary.com and I’ll fill you in on the details.
** All data sourced from FMLS/Realist