Perpetuated by rampant special assessments by Home Owner Associations that were never funded sufficiently, lenders are shying away from lending on these properties. FHA is currently revising it's guidelines with respect to "approving" certain condo complexes. The current situation is there are certain condo complexes that were built to FHA approval specifications. The one's that did not go through this process (most in the Bay Area because prices were way above what FHA would lend) had to get "spot" approvals. This took weeks and made FHA loans on these complexes far less attractive. Now it looks like all complexes will not have FHA approval and all will be required to be spot checked - ughh!!!
FHA was the one source for low down payment loans on condos recently - at 3.5%. Otherwise at least 15% down for conventional loans. If FHA becomes far more difficult to use, then far fewer buyers will be buying condos - not a good sign for a market that is already soft due to all the REOs and short sales.
Financing is key - and the single family home market is relatively firm because financing is readily available.
Is there an opportunity in the condo market - absolutely yes - but when, that's tough to say.
One complex is so underwater on Technology Drive, that listing agents are suggesting cash offers only!
That complex is 5 years old, had sold at prices above $500k for 2 bedroom units, now units are offered at $249,000, and many of the units are rentals, which is another major deterrent to lenders. Add the potential of a special assessment or HOA litigation and you have a true nightmare. Beautiful property too.
