Archive for December, 2009

Condominium Boards of Directors need to know new FHA rules

Monday, December 28th, 2009

Recent changes in the rules by which condominiums may be purchased with FHA financing is important for the viability of a community.   If your complex has been approved for FHA financing in the past, that may change with the new rules.  If you are on your Board of Directors or an association manager of a condominium HOA (home owners association), you want make sure your complex will comply with the new rules.

FHA is the primary way to finance an owner occupied purchase with low downpayment (currently 3.5%).  It is not an investor loan. It can only be used by purchasers intending to occupy the property.  Conventional lenders have eliminated any low down financing programs.  They now require 10 – 20% downpayment as a minimum.   A lot of purchases of condominiums are made by first time homebuyers, which often means limited resources for downpayment.  Therefore maintaining FHA financing availability for a community is critical to keep the widest possible appeal to prospective buyers.   Without it a complex has limited its potential demand/appeal and can likely result in lower prices for current owners when they go to sell.


A Short History of Condominiums in Austin

Wednesday, December 16th, 2009

In the beginning

Before the 70’s the word “condominium” wasn’t known in Austin.  During the 70’s a few condominium complexes were built as “condos” and not “apartments”, the difference being they were better built (especially in sound & thermal insulation) and condos started including washer/dryer connections that most apartments did not.  Most of these early condominiums were really more townhomes (typically 2 story with no neighbor above or below) than what most people think of as condominiums.  Austin was in a serious growth mode during the 70’s.  In the central part of the city, land was just starting to get expensive.  It no longer made sense to built single or multi-family properties on these plots of land. Then in 1977, Orange Tree Condominiums was the first condo complex built in the west campus of the University of Texas.  These were the first “condos” like most people think of condominiums – larger, many unit, multi-storied (typically 3), more modern styled, with upscaled common facilities like pools, covered parking, etc.  It wasn’t long after that Austin started to experience it’s first ‘condo boom’.  Every year brought more redevelopment of existing housing being torn down to build condominium communities, not without conflict.  These were the growing pains of a city on the move.  Even though interest rates were sky high during the late 70’s, these condominium projects met with considerable success.

The 80’s were THE decade of condos…..until the bust

By 80’s the boom was on.  Some of the earlier communities were Encinal and de Saligney (still one of my favorites) near downtown, West End and Villa West slightly further west, Edgecliff in NW, Brandywine in north, many complexes started in the campus area like Seton Ave & Palmetto & Elms & Gazebo & Hyde Park & Nueces Park & Nueces Corner & many others.  The interesting thing about a lot of these early condos are the locations they were able to purchase in those early days for “reasonable” prices that allowed the developers to sell moderately priced housing in very good areas.  These days those areas are so expensive that either the prices of the individual units has to be much higher or the development has to go higher, as in hi-rise, to make the land cost a reasonable investment.  It’s still evident in the prices that you can get these earlier condo projects for compared to more modern condos in the same area.  Then in 1985 it all came to a screeching halt.  The economy of Texas was dealt the triple whammy of deregulation of banking and oil and the tax laws changed to make investment real estate support itself on its true cash flow instead of the false profit of tax deductions.  Several communities were already in construction by the time the handwriting was on the wall.  Many of these late projects ended up in foreclosure along with many other single family properties after real estate values dropped to 50% or more of the values they had been selling at only a year or two or three ago.  Condominiums were considered some of the worst excess in this recession.