MIAMI, FL - CondoReports.com announces the launch of the BuildingHealth Index. The index is the first measure of condominium building health county-wide with ratings on nearly 2,000 condominium and townhome complexes throughout Miami Dade County. BuildingHealth Index ratings provide an indicator of likely condominium association stability and historical pricing trends within a condominium community. The recently released ratings are available free for a limited time at www.CondoReports.com.
The BuildingHealth index is based on a proprietary measure developed by CondoReports.com using its comprehensive condominium and market data. The index is calculated from a number of variables that affect the financial stability of condominium building and associations including foreclosures, owner occupancy percentage, number of units for sale, and original unit purchase price versus current market prices and other factors. A rating of 50 is the median rating indicating that half of the buildings in the county are healthier and half are less healthy than that building.
Explanation of the Ratings
On average the higher the index reading, the more stable the building is relative to other buildings. An index rating of 99 would indicate that the building is among the most stable buildings in the County.
Buildings with higher ratings have experienced little, if any foreclosure activity, more stable pricing trends compared to other buildings, and larger populations of owner occupants. These buildings are less likely to have cash strapped condo associations as a larger percent of the unit owners in these highly rated buildings are more likely current with their maintenance fees.
A rating of 1 would indicate a building is possibly among the least stable buildings in the County according to the index's criteria. The standard profile of these buildings would be nearly the opposite of buildings that have high ratings. Generally, these buildings have experienced meaningful foreclosure activity and substantial price decreases that have outpaced the market.
Lower rated buildings are more likely to have financial difficulty with their associations as a significant percentage of unit owners have been unwilling or unable to pay maintenance fees. While challenging in even the most stable buildings, the availability of conventional financing in many of the lower rated buildings is in many cases non-existent.
A Tool for Buyers
"It is vitally important for buyers to know the stability and potential risk of the buildings they are buying into. Just because a unit appears to be cheap, doesn't mean it may not drop in price further. Beyond pricing dynamics, lower rated buildings are more prone to special assessment or higher maintenance simply because of the dynamics of the building," according to Adam Cappel, President of CondoReports.com and creator of the index.
"Buyers need to spend time researching purchasing decisions in order to avoid making poor financial decisions or buying into a building where they might be subject to large future assessments. CondoReports.com, through its BuildingHealth Index and Building and Market Reports, provides the tools necessary to understand values and price stability on condominium buildings and markets throughout Miami Dade County before you buy."
Use of the Index
The index was developed for CondoReports.com's financial services clients and unit buyers as a way to quantify and understand potential financial problems in associations and previous price trend on a county-wide basis.
As an example, one of the uses of the index is to provide a proxy for those trying to better understand potential exposure to higher maintenance fees or special assessment. Given that association's financial situations are generally closely guarded and collecting association financials in mass is a monumental task, the index provides a next best option for those unable to spend the time and money required to analyze each condominium.
"Our clients need a quick and simple measure to quantify potentially risky buildings without doing substantial due diligence on hundreds of buildings in Miami Dade County. This index is the only one that we're aware of where users can size up buildings quickly and easily," says Cappel.
Insights into Future Pricing
While the BuildingHealth index provides a measure of condo association health and is reflective of previous price trends, Cappel warns that it is not intended to be a direct predictor of future values or price trends. Low ratings do not necessarily indicate that a building is subject to substantial future price declines as prices in many of these buildings have already come down substantially. Nor is a high rating indicative of a building that will not see future price declines.
"The correlation that we're seeing is that many of the buildings with the lowest ratings are starting to see prices stabilize and activity increase. All-cash buyers are seeing investment opportunities in these condos as price declines in these buildings have outpaced the overall market. These buildings may in fact prove to be some of the best buying opportunities assuming you have the ability to close all cash and weather the storm of higher maintenance fees and special assessments," says Cappel.
Cappel also notes that some of the higher rated buildings might be poised for larger price drops. "The market has clearly moved substantially over the past 18 to 24 months. Some of the higher rated buildings may have had little transaction activity with sellers sticking to their guns on pricing. These sellers may become more motivated to sell dragging the prices of these buildings down in order to meet the market."
To view BuildingHealth Ratings or free reports on Miami-Dade condo buildings or markets, please visit www.CondoReports.com.
Source: CondoReports.com