One interesting aspect of today's Existing Home Sales report is that while the inventory of single family homes is decreasing, the inventory of condos is increasing. This is consistent with past weak housing markets--the detached market tends to come back before the attached market.
One of the reasons for this may be that detached houses are in more desirable locations, and so when prices fall, people who could not afford houses in the single-family market before a price drop can do so afterward. But incomes are falling along with house prices now, so I am not sure that is the explanation.
Rather, it may be that people prefer detached houses because they afford a degree of control not present in the condo market. If you own your own house, and think it is time to repave the driveway, you can just do it. But when you are in a condo, you need to get your condo board to approve capital expenses-even when they are necessary. I have been at condo board meetings where people protested spending money to deal with curable depreciation (i.e., make capital expenses whose value is greater than cost). And so the entire complex deteriorates.
No comments:
Post a Comment