[Bhaalspawn]

For those of us who are employed and who are tired of tossing money away in rent, does it make sense to buy a condo now? Can condo prices drop much more than they already have? When someone lists a condo price, how much below the listed price would they realistically take in this market? (Can you get the "$80,000" condo for $65,000?) If you actually do buy one of these condos and have to bail out in a year, for whatever reason, how likely would it be that you could get rid of it for what you paid for it?

[Bhaalspawn]

Overall, is it a better investment to buy a nice condo in good shape for say $75,000 or to buy a house (assume same area) for the same price (but presumably in worse shape and with a lower degree of niceness)? I've seen some houses that looked like they might be competitive with condos in that price range in my target area, but I wonder what kind of condition they're in and tend to assume that a condo for the same price would be in better condition and more comfortable.

[Humboldt1]

It is a better time to buy a condo than this time last year. However, if you can wait this time next year will be better. Prices are continuing to drop and inventories remain near 11 months, which is very high.

You must be looking at condos in some really cheap areas as 75K is really cheap. For a first time buyer I recommend going condo unless you are handy nad can repair a single family house.

If you are in Michigan you may be able to get a deal on a foreclosure, but honestly I would not be buying in Michigan as it will decline for a long time to come.

And I am tired of people saying "throwing away money in rent.". The real throwing away of money is buying a place and then seeing your equity position decline as its value drops with the market. And this is coming from a guy who owns investment real estate in Chicago and its suburbs.

Good luck either way should you decide to pursue a purchase.

[Bhaalspawn]

The locations I'm considering at are in the northwest suburbs--Farmington Hills, Novi, Commerce, West Bloomfield, etc. I agree with you that paying rent does not constitute throwing money away relative to losing value on a property. However, in the price range that I am targeting, you have to wonder whether the properties could lose the value of my yearly rent (minus property taxes, association fees, and other costs I wouldn't have as a renter) each year.

So, I wonder, how much further could they drop and might I be able to buy one with a lowball offer? I agree with you that prices will only continue to drop, but, presumably, sellers are aware of this and it might be possible to find a desperate seller (or an apathetic bank) willing to cut his losses and take a lowball offer. (How does $60,000 for a condo that lists at $75,000 sound?)

[kimba01]

I think if you KNOW you will be staying in the condo for some time-go ahead. Are you finding those prices on condos in the areas you listed? I know they are low all around. I see condos out in the Sterling Hts/Utica/Shelby area for very low prices also. Some are brand new.

Even if you sell the condo for what you paid for it-you will be coming out ahead of renting.

[Bhaalspawn]

If I thought I could sell for what I paid for it or slightly below what I paid for it (still cheaper than plunking down $8400/year on rent), I wouldn't be as concerned, and I do plan to only purchase a property that I believe to be a bargain. However, I'm not very optimistic about the future of the Michigan economy (nor the U.S. economy for that matter). What happens if the Detroit area ends up suffering a massive amount of depopulation as its economy crumbles? A part of me thinks that "we ain't seen nothing yet," both for the Michigan economy and the U.S. economy.

I guess the calculation goes something like this. Figure out how long you think you'll be living there (say, three years). Then figure out how much you'd spend on rent during those three years (in my case, at current rates, 3 x $8400 = $25,200). Take that number and subtract the costs of taxes, homeowners insurance, association fees, maintenance, inspection costs, and closing costs from that over that time period. What's left is the amount of money you would have lost by renting.

When you go to sell, will you be able to sell it for what you paid for it minus the money you would have otherwise lost if you had been renting?

Pretend that taxes run $2000/year, that the association fee is $200/month, and that the fixed closing and inspection costs were $3000 (I have no idea what all of that would go for). Let's assume $2000 in maintenance. Over 36 months the cost would be $15,200. (I didn't plan it this way, but using my calculations, it's exactly $10,000 less than what you would have spent on rent.)

So, in three years, would you be able to get rid of it for $10,000 less than what you paid for it or at most $12,000 less (eating a $2000 loss)? (Of course, that all ignores real estate commission fees.) I guess that's what I wonder about and take into consideration.

For a one-year horizon, the equation would be $8400 - $3000 - $2000 - $2400 = $1000. If you put $1000 into it when you moved in, you'd need to sell it for your purchase price after one year (ignoring real estate commission fees) to break even.

[kimba01]

Sure is a good question. I guess you could roll the dice and hope!