Like being bumped out of first class, or getting the worst table at your favorite restaurant, being “downgraded” is no one’s idea of a good time. Condominium values in Center City Philadelphia can also be downgraded. Since enjoying a popular, if not wild ride over the past decade as demand had outweighed supply, new buildings began popping up like toadstools out of freshly laid cow patties- some a delicacy, and some perhaps poisonous. Values of individual condominiums in Center City Philadelphia are heavily linked to the building in which the unit is located, and the resale values of condominiums with any given buildings tend to move in unison, trending either up or down. The phenomenon of values resetting or being downgraded within any given building can be a function of many factors from the “graying” of a building, to recent low comparable sales, to the building becoming non Fannie-Mae warrant-able.
The graying of a building is readily apparent in terms of curb appeal, lobby appeal, or hallway appeal. We all know a tired building when we see one. As a building visually ages, the values within the building have a tendency to wane. Says one long-time (and discreet) owner at the Philadelphian condominiums at 2401 Pennsylvania Avenue “The smartest condominium associations will be proactive in invoking assessments to maintain the appeal and values within their building, and 2401 has made some smart moves in terms of our recent decision to invest in new hallway renovations, and exterior balcony work to improve the curb appeal of our mid-century modern styled building.” Touche’. Under the guise of “Even a Blind Man Knows When The Sun Is Shining”, the Philadelphian’s condominium board wisely listened to what buyers were saying about the somewhat cosmetically dated portions of the building and are making improvements to head off any downgrading of values within the building.
Recent low comparable sales can heavily attribute to the resetting of condo values here in Center City. If a few recent short sales, or foreclosures have occurred within the building- the values can easily fall as appraisers and buyers alike will tend to want to match the values of the most recent sales. “This can be an awful downward spiral for a handful of buildings in Center City” says John Hirniak at Prudential Fox and Roach Realtors who specializes in condo sales in Old City. “Appraisers are mindful of the trending of values within any given condo building here in town, and buyers are well advised to watch for inequities in recent as well” continues Hirniak.
One bad apple can indeed spoil the bunch- Especially if that apple has many followers.
Lastly, a condominium association that decides- either through willful neglect, or out of outright ignorance of Fannie Mae guidelines for financing may find the values within the building to deteriorate rapidly. “Should a building become non Fannie Mae warrant-able, the building becomes exceedingly difficult to finance” says Mike Tavani of Trident Mortgage, “and a domino effect can occur- Sellers begin competing with each other to sell, and prices begin to drop”. Coupled with the fact that the average first time buyer can no longer come up with the often needed 30% down to overcome the lack of warrant-ability by Fannie Mae, the result may be a clear lack of demand. Low demand and high supply results in a downward resetting of the values within a given Center City condo building, and the recovery time from such a downward spiral has yet to be seen. “The best approach is for the buildings management or the condominium board to implement a hold on the number of tenants within the building to keep the ratio of tenants to owners under the threshold for Fannie Mae Warrant-ability” says Tavani.
A mindful and proactive condominium association can ward off a fair amount of the pressure of decreased values within any given Center City Condominium building. Keeping the visual appeal, as well as keeping the building within Fannie Mae guidelines are the two easiest and attainable tasks an association can do to prevent the building from being seated at that awful table that sits adjacent to the bathroom, or schlepping a long ride in coach.