Condos in Worcester- Don't hold your breath they are NOT COMING-
Interesting article in the T&G a couple weeks ago about condos.
A shout out to Juliana Danquah at Century 21 XSELL, a great agent who is featured in this article.
The issue here is that condos are an affordable option for first-time buyers; some might even consider them a starter home now. Worcester doesn't have very many condos. Let's explore why that is the case.
Worcester's Zoning and Housing Options
Worcester has zoning that promotes what we call attached single-family homes. These are side-by-side duplexes that have their own water/sewer, gas, and electrical connections. Each person owns their own side and has responsibility for their own property using a single lot line. This allows for condo-like living without a condo fee. Should these be considered condos?
Challenges in Condo Development
There are not that many large parcels left in Worcester to build a lot of units on. There are a couple of big projects in the works with a number of units, but they are coming on as apartment buildings.
Real Estate Market Trends
A lot has changed in the real estate market over the years. People and entities like hedge funds and insurance companies see real estate as a hedge against inflation and a way to make more money than in Treasuries. What this has done is make large apartment complexes valuable in themselves over the long term. Entities can own these and depreciate the asset on their taxes while having cash flow. Not to mention that the asset prices continue to climb.
Government Incentives
Another factor here is that there is federal and state money that flows to these developers in terms of facade grants and other funding. Additionally, there is money for the developers to have low-income housing components as well. This doesn't allow for them to sell these off as condos for a number of years.
Builder Trends
There is also the trend for builders to make larger houses since there is limited supply of land. Why build a couple of 1200 SF condos when you can build 2100 SF custom attached homes and make more money?
Past Condo Creation Issues
In the past, Worcester has seen condo creation within 3-family homes. But this is problematic since the costs of rehabbing a 3-decker are high, and often the condo units that aren't quite "NEW" do not put enough money in reserves or have high enough condo fees. What we have found is that individual owners of 3-deckers often do a better job than three people owning the building together.
Future of Condos in Worcester
With all this being said, I do not see low-priced condos hitting the Worcester market anytime soon. Actually, if I were to guess, the next batch of condos will be on the upper end of the market for wealthy empty nesters who are looking to downsize from suburban homes and be closer to restaurants and other city amenities. These may be apartment buildings being sold off to satisfy investors or conversions in office buildings.
However, any additional units of housing that are created, either low-priced or high-end, rentals or ownership opportunities, will benefit first-time homebuyers by increasing the supply and putting downward pressure on prices.
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