Appetite For Coops and Condos Growing

I just read an article in Broker Universe that nationally, people are choosing to live in urban environments so they are choosing condos and coops instead of good ole fashioned single family homes. New York is still the largest market for these property types, but interest in growing nationwide.

The article puts it this way:

In May, existing condominium and cooperative housing sales increased 1.9% to a seasonally adjusted annual rate of 852,000 units, up from a pace of 836,000 in April, according to the National Association of Realtors, Washington. However, sales were 6.6% below the 912,000-unit pace in May 2005. Meanwhile, total existing home sales including single-family, townhouses, condominiums and co-ops dropped by 1.2% to a seasonally adjusted annual rate of 6.67 million units in May, down from a pace of 6.75 million in April, and were 6.6% below the 7.14-million-unit level in May 2005. "There's now a clear pattern of slower home-sales activity in many higher-cost markets, which are more sensitive to rises in interest rates, and higher home sales in moderately priced areas which have experienced job growth," NAR's chief economist, David Lereah, said. "Although mortgage interest rates remain historically low, the uptrend in interest rates this year is affecting those buyers who are at the margins of affordability.

NAR reported the median existing condo price was $229,300 in May, up 1.9% from a year earlier, which is another indicator of growing demand and price appreciation. Granted there are regional differences with New York being probably the largest co-op market in the country.

If the market for coops and condos is increasing, then many more mortgage brokers and loan originators will attempt to get into the market to help bolster up their sagging loan production. One thing that is tricky about coops and condos is that the building must also be approved during the loan process, it must have adequate insurance coverage, sound financials and high owner occupancy. If the building is subpar, the buyer won't be able to obtain financing at preferred rates, or perhaps not at all. It won't sit well with the other players in the transaction to have a deal fall through because the building wasn't up to par. Fortunately many lenders are publishing their database of buildings online for mortgage brokers, so that we can check the maximum financing restrictions, what coop or condo documents need to be updated in order to close the purchase or refinance transaction. It would be great if all institutional lenders did this, but they don't.

In short, it's best with these property types to work with a mortgage broker who is experienced in handling coop and condo financing.