I caught site of an interesting WSJ article from a colleague’s facebook post (thanks Lisa Trosien) and thought it was important to share on this site. The article, a Q& A type post discusses the shadow market of condos on rentals.
Something that caught my attention was the author’s mention of new regulations imposed on condo developments by Fannie Mae. While it was quickly mentioned, the true ramifications of the changes go well beyond foreclosures. First, as of March 1, 2009, Fannie Mae requires that a condo development obtain 75% of pre-sales prior to receive financing. Prior to this date, a condo development only needed 51%. This difference places a huge burden to both the condo development and to the condo homeowners. Because financing is not available, potential homeowners are not as interested in buying at this development. Worse, the ones that did will have larger assessments, causing many to opt out of living in these homes and will put these homes on the market. Since the market is currently supersaturated, the homeowners fearing foreclosure will push the homes as rentals creating a larger shadow market in the already saturated rental market. To compete in this ever growing market of rentals, prices will drop and vacancy rates will increase. Talk about a mess.
Please feel free to let us know what you think about these short-sided solutions.
Filed under: About | Tagged: condos, fannie mae, foreclosure, multi-family, rentals, shadow market, wall street journal
