How Much Co-op or Condo Can You Afford? Money, Markets and Managers

Prices of most co-ops and condominiums in the New York metropolitan area—which nowadays extends as far west as eastern Pennsylvania and as far south as the lower Jersey shore—have reached stratospheric proportions. In once-blighted urban areas like Hoboken and Jersey City, prices are on par with, and in many cases exceed, dwellings in the outer boroughs of New York. And it's not just a few tony communities in Northern New Jersey that carry a big price tag—the whole suburban corridor has gone through the proverbial roof.

For the last two years or so, economists have played at Chicken Little, warning that the so-called housing bubble is soon to burst. While the sky has not yet fallen and no one has suggested that the market is truly cooling, it does seem to be slightly less searingly hot. For the first time in recent memory, the pendulum has begun to swing—albeit slowly, very slowly—in the other direction.

The combination of higher interest rates and greater home supply has produced the closest thing to a buyer's market in New Jersey in years.

A Buyer or Seller's Market

Why would rising interest rates herald the end of a seller's market? If it is time to buy, how much co-op or condo can potential buyers afford? What kind of financial shape should they be in, to pass the screening process? Finally, what kind of shape should be co-op or condominium development be in, in order to entice the right buyers? Let's take a look.

The first indication that the momentum is shifting is that there are more houses on the market than there were a year ago - 20 to 25 percent more, in a 30-mile radius of New York, than in 2005, according to Tom Mayer, a real estate broker with Weichert Realtors in Pompton Plains. The glut of available homes means that buyers have more to choose from, and thus more inclination to be choosy, and that sellers have more competition, and thus less inclination to hold the line.

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