Jacksonville Condos and St. Augustine Condos: An Investor's Market

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Jacksonville Condos and St. Augustine Condos: An Investor's Market

Why would I say that the Jacksonville and St. Augustine Condo Market belongs to Investors?

1. Hard to Get Financing on the condos.
2. A good number of the condos have numbers that work for investors.

1. Hard to Get Financing on the condos.

A large part of the basic condo market was (I say "was") the first time buyer.  A noticeable characteristic of the first time buyer was having little money down and using financing program such as FHA that currently requires 3.5% down.  Other financing available typically starts at 10% and you typically  need to put 20% - 25% down to get the best rate.  But in the current condo market there are not that many FHA qualified condos available.  To make matters worse, bank's can't sell the majority of loans they take on condos onto the secondary market (FNMA,etc.) so they make less condo loans.

Conclusion:  The cash buyer is king of condos.   

Due to the lack of a secondary market prices  of condos have had a downward swing to come into the range of what people will pay cash for the condos.  The National Association of Realtors is trying to get more financing available for condos.  This will in effect help condo prices rise since it will open condos to the larger buyer population of those who buy condos with financing.  (Please note it is not impossible to finance a condo, just really, really hard.  Each condo association is taken on a case by case basis).

"In a letter to FHA Commissioner and Acting Assistant Secretary for Housing Robert Ryan, the groups petitioned HUD to eliminate a rule requiring a 50 percent owner/occupancy rate in a condo development for buyers to obtain FHA insurance, and to amend or temporarily suspend a requirement that allows only half of the units in a condo development to have FHA loans. Source": ReverseMortgageDaily (06/13/11) Gerace, Alyssa

2. A good number of the condos have numbers that work for investors.

This part is simple.  An investor can buy a condo, rent it out and make a great return. 

Now you would expect the lack of financing to slow the condo market down.  In the past year it hasn't had the effect that it was having.  This is because prices have gotten so low that the investors have jumped in.  Places where they were dozens of Jacksonville condos on the market now barely have any.  I am seeing foreclosure and short sale condos sell in days at multiple locations, especially the Beaches (Jacksonville Beach and Ponte Vedra Beach).  Multiple bid situations have become common.  The only thing keeping investors out has been certain bank foreclosures not allowing an investor to bid on the condo until the condo has been on the market for 2 weeks.  Even then, the condos still go under contract in a couple days.

So what does this mean to you?

1.  If you are looking at short sale/foreclosure condos expect it to go quickly.  If you are not ready to buy now then you are wasting your time expecting it to be on the market 6 months down the road.

2.  Ask your lender if they loan on a condo and what condos they will/will not loan on.  Just being pre-qualified doesn't help with condos. The condo association itself also has to be "pre-qualified".

Date: Thursday, June, 16th 2011 @ 10:32:00 AM
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