New incentives for condo shoppers
As the housing market cools, people are looking for any kind of deal and for any kind of hope.
Condominiums have been taking a hit just as hard as the home market, but there may be some good news in sight.
A national index was just split into two different categories to help explain in detail what is going on and what is most likely to happen to the condo industry within the next six months.
The August 29, 2006 article, “ Multifamily Market Divergence Spawns Condo Bargains,” written by Broderick Perkins of Realty Times, explains how these two indexes will provide a new found knowledge to both buyer and seller in the condo and rental markets.
The National Association of Homebuilders (NAHB) recently divided its quarterly Multifamily Market Index (MMI) in two in an attempt to better report the harsh discrepancy in the higher-density housing division.
NAHB's two new indexes, the Multifamily Rental Market Index (MRMI) and the Multifamily Condo Market Index (MCMI) are reflections of the recent apartment boom and condominium gloom.
As a result of several things, including the index’s statistics, multiple incentives are being offered those still prospectively looking in the condo market.
“The quarterly indexes are nationwide surveys of builders and property owners who are asked questions about current market conditions as well as their expectations for the next six months. The index is based on a scale from 0 to 100, with a rating of 50 generally indicating that the number of positive responses is about the same as the number of negative responses.”
The latest MRMI reported a high demand for both luxury apartments (Class A) and lower-priced apartments (Class C), reaching their highest recorded levels in the second quarter of 2006. Luxury rentals reached an index of 73.2, up from its year-over-year mark of 62.5.
“The demand for moderately priced apartments (Class B) stood at 71.4 percent, up 6.6 points from a year ago. Lower-priced Class C rentals' index reached 68.0, up from 61.5 a year ago.”
The landlords' market (opposed to the renter’s market) is growing by leaps and bounds, as a result of higher interest rates and even higher home prices, thus forcing people into apartments, temporary or full-time.
“Meanwhile, a condo glut is forming a buyers' market in the higher-density, owner-occupied housing market due to over building, rental conversions and speculator flight.”
“As condo prices fall faster than single family homes, consumers still shopping for homes may see single-family homes as a better investment over the next market cycle.”
“Not surprising then, the NAHB's MCMI reveals the condo market index, gauging builder sentiment about condo production over the next six months, was down to 34 from 43 a year ago. The supply conditions index fell from 61.3 to 32 during the same period.”
As a result, condo developers and owners are offering a host of incentives to attract buyers to the condo market once again.
About 25 percent of condo owners reduced prices by an average 9 percent, while approximately 75 percent said that they plan on using non-price related incentives to boost sales and limit cancellations.
Some of the offered non-price incentives include: “Sixty-six percent were including optional items at no cost. Sixty-six percent were paying closing costs or other fees. Thirty-three percent were absorbing financing points. Fifty percent were using real estate agents and brokers to help sell, up from 20 percent a year ago.”
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