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The article says rents are falling while housing prices are remaining stable. I wonder if this means we'll start to see a lot of apartments convert to condomin

The article says rents are falling while housing prices are remaining stable. I wonder if this means we'll start to see a lot of apartments convert to condominiums to equalize this imbalance?

xyzelement 4y ago
Probably some. A house and an apartment you own aren't really comparable anymore as the appeal of urban living for professionals has declined, however. Probably most likely impact is the decline on new apartment development and perhaps dilapidation of some of the stock ("if I can't get 3k/month for this place anymore, fine I'll charge 2k but I won't bother maintaining it")
- sacrosancty 4y ago
  Isn't it the other way round? When rents are higher, how well maintained the house is matters less to tenants compared to the location and rent. But when rents are low, they have more freedom to choose a well maintained house. If you're talking about long-term maintenance so that skipping it is just deferring costs to greater costs in the future, then why would a landlord do that unless they expect to demolish the house before ever fixing it up?
  - deleted 4y ago
    [deleted]
  - autoexec 4y ago
    > When rents are higher, how well maintained the house is matters less to tenants When I'm paying more than I think I should in rent I start expecting more for my money. Suddenly I want every little thing fixed and I push for things like newer appliances. When rent is low and I feel like I'm getting a really good deal, I'm much more willing to let the little stuff slide.
    - sacrosancty 4y ago
      You're acting the opposite to the power you have. I think people overall act in line with their power. High rents means tenants are weaker and can demand less without being told "take it or leave it".
CrunchyJams 4y ago
Rental units generally change hands much more frequently than owned homes. Accordingly, rental units offer a more real-time view of housing cost trends. There are also a lot of homeowners who locked in at a very low interest rate (both new homes and refinancing) with little incentive to move any time soon.
paxys 4y ago
What's the difference between the two? Every rental unit is ultimately owned by someone. And if rents are falling but your equity is rising, you are still coming out ahead.
- enjo 4y ago
  The big issue is that condos come with a bunch of additional issues surrounding mortgages. Along with very different maintenance models. It's one of the hidden problems of the housing shortage: condos are very difficult to get financing for which artificially deflates the market for them. Which means that our best form of housing in terms of the efficiency of building units isn't terribly attractive to actually build.
  - alistairSH 4y ago
    Are condos really the best form of housing? I’d guess apartments were better, in as much as the build cost is similar, but the resident has far more flexibility. Owning a condo when the building hits ~50 years old or so is problematic because of the massive influx of cash needed to replace mechanical systems (or worse).
    - ghaff 4y ago
      Renting is always going to be more flexible/mobile. But you can also be kicked out at any time, your rent can often be raised somewhat arbitrarily, and you're probably limited in the degree to which you can modify your unit. (And you'll always be paying rent.)
    - deleted 4y ago
      [deleted]
- alistairSH 4y ago
  Depends on the ownership structure. A lot of large apartment buildings are single-owner/single-management with all units rented. Usually some sort of corporate owner. Condo buildings might have id rentals offered by individual owners. The former is (possibly) more likely to ask questions like “is it better to sell the whole building in the face of falling revenue?” The latter, if their mortgage is lower than rental income, might just hold the unit regardless of the unit’s value. Probably a much less sophisticated owner/landlord than a big corporation.
michaelbarton 4y ago
Somewhat related: there was a discussion on NPR about how new builds will likely be much more popular because of rising interest rates. The cause is that there will be a much smaller supply of previously owned homes because owners won’t want to refinance at the much higher rates at the moment.
- scarface74 4y ago
  According to Slate Money, the reason that new builds are in more demand is that builders have programs that will reduce the interest rate by around 2% making the mortgage lower than a similar price existing home.
- paxys 4y ago
  The cost of raw materials and labor has gone up a lot more than interest rates in the last couple years.
  - ivalm 4y ago
    But at least in hcol areas the cost of the house is in land value, so if that goes down you can pay more for labor and materials while charge less for the finished product. That $2M 1800sqft house is not priced on labor and materials.
    - loandbehold 4y ago
      Cost of labor is a large part of why housing is expensive in hcol areas. Workers that make $15/hour in Dallas are making $45/hour in Los Angeles.
      - ivalm 4y ago
        I originally didn’t think it’s a big effect but apparently per sqft new construction sfh in CA is $500 and in TX is $100. That’s insnane (so 2000sqft new construction costing $1M vs $200k).
paulcole 4y ago
NYT had an article about this recently: https://www.nytimes.com/2023/02/24/realestate/florida-condo-deconversions-lawsuit.html https://www.nytimes.com/2023/02/24/realestate/florida-condo-...
__derek__ 4y ago
In Seattle, a converted apartment will generally have much lower build quality (e.g., wood walls rather than concrete), so it's not going to appeal to someone in the market for a purpose-built condo. The business of selling condos is also significantly less attractive to developers.[1] [1]: https://kuow.org/stories/why-are-condos-in-seattle-so-rare-and-expensive https://kuow.org/stories/why-are-condos-in-seattle-so-rare-a...

The article says rents are falling while housing prices are remaining stable. I wonder if this means we'll start to see a lot of apartments convert to condominiums to equalize this imbalance?

xyzelement 4y ago

Probably some. A house and an apartment you own aren't really comparable anymore as the appeal of urban living for professionals has declined, however. Probably most likely impact is the decline on new apartment development and perhaps dilapidation of some of the stock ("if I can't get 3k/month for this place anymore, fine I'll charge 2k but I won't bother maintaining it")

sacrosancty 4y ago
Isn't it the other way round? When rents are higher, how well maintained the house is matters less to tenants compared to the location and rent. But when rents are low, they have more freedom to choose a well maintained house. If you're talking about long-term maintenance so that skipping it is just deferring costs to greater costs in the future, then why would a landlord do that unless they expect to demolish the house before ever fixing it up?
- deleted 4y ago
  [deleted]
- autoexec 4y ago
  > When rents are higher, how well maintained the house is matters less to tenants When I'm paying more than I think I should in rent I start expecting more for my money. Suddenly I want every little thing fixed and I push for things like newer appliances. When rent is low and I feel like I'm getting a really good deal, I'm much more willing to let the little stuff slide.
  - sacrosancty 4y ago
    You're acting the opposite to the power you have. I think people overall act in line with their power. High rents means tenants are weaker and can demand less without being told "take it or leave it".

CrunchyJams 4y ago

Rental units generally change hands much more frequently than owned homes. Accordingly, rental units offer a more real-time view of housing cost trends. There are also a lot of homeowners who locked in at a very low interest rate (both new homes and refinancing) with little incentive to move any time soon.

paxys 4y ago

What's the difference between the two? Every rental unit is ultimately owned by someone. And if rents are falling but your equity is rising, you are still coming out ahead.

enjo 4y ago
The big issue is that condos come with a bunch of additional issues surrounding mortgages. Along with very different maintenance models. It's one of the hidden problems of the housing shortage: condos are very difficult to get financing for which artificially deflates the market for them. Which means that our best form of housing in terms of the efficiency of building units isn't terribly attractive to actually build.
- alistairSH 4y ago
  Are condos really the best form of housing? I’d guess apartments were better, in as much as the build cost is similar, but the resident has far more flexibility. Owning a condo when the building hits ~50 years old or so is problematic because of the massive influx of cash needed to replace mechanical systems (or worse).
  - ghaff 4y ago
    Renting is always going to be more flexible/mobile. But you can also be kicked out at any time, your rent can often be raised somewhat arbitrarily, and you're probably limited in the degree to which you can modify your unit. (And you'll always be paying rent.)
  - deleted 4y ago
    [deleted]
alistairSH 4y ago
Depends on the ownership structure. A lot of large apartment buildings are single-owner/single-management with all units rented. Usually some sort of corporate owner. Condo buildings might have id rentals offered by individual owners. The former is (possibly) more likely to ask questions like “is it better to sell the whole building in the face of falling revenue?” The latter, if their mortgage is lower than rental income, might just hold the unit regardless of the unit’s value. Probably a much less sophisticated owner/landlord than a big corporation.

michaelbarton 4y ago

Somewhat related: there was a discussion on NPR about how new builds will likely be much more popular because of rising interest rates. The cause is that there will be a much smaller supply of previously owned homes because owners won’t want to refinance at the much higher rates at the moment.

scarface74 4y ago
According to Slate Money, the reason that new builds are in more demand is that builders have programs that will reduce the interest rate by around 2% making the mortgage lower than a similar price existing home.
paxys 4y ago
The cost of raw materials and labor has gone up a lot more than interest rates in the last couple years.
- ivalm 4y ago
  But at least in hcol areas the cost of the house is in land value, so if that goes down you can pay more for labor and materials while charge less for the finished product. That $2M 1800sqft house is not priced on labor and materials.
  - loandbehold 4y ago
    Cost of labor is a large part of why housing is expensive in hcol areas. Workers that make $15/hour in Dallas are making $45/hour in Los Angeles.
    - ivalm 4y ago
      I originally didn’t think it’s a big effect but apparently per sqft new construction sfh in CA is $500 and in TX is $100. That’s insnane (so 2000sqft new construction costing $1M vs $200k).

paulcole 4y ago

NYT had an article about this recently: https://www.nytimes.com/2023/02/24/realestate/florida-condo-deconversions-lawsuit.html https://www.nytimes.com/2023/02/24/realestate/florida-condo-...

__derek__ 4y ago

In Seattle, a converted apartment will generally have much lower build quality (e.g., wood walls rather than concrete), so it's not going to appeal to someone in the market for a purpose-built condo. The business of selling condos is also significantly less attractive to developers.[1] [1]: https://kuow.org/stories/why-are-condos-in-seattle-so-rare-and-expensive https://kuow.org/stories/why-are-condos-in-seattle-so-rare-a...