I wish I had a crystal ball to tell you with certainty that I could predict where the market will be 3 years from now but I can't. Your advisors are correct in that the money spent on closing will not be recouped in that short time frame. What you want to know is will the market increase in that period to allow her to "move up". What I can do is give you statistics from The Commercial Record who reports on real estate and mortgages in Connecticut and Massachusets.
According to the laest stats on New Haven from The Commercial Record: The number of Sales comparing 2007 to 2008 has dropped 58% (148 versus 61) However, the median price paid comparing 2007 to 2008 rose 1.37% ($182,500-$185,000). Not bad for this market.
One of the reasons that New Haven County has remained relatively stable in price is the draw of Yale both the university and the hospital. With the expansion of Yale Hospital into the former Bayer site, it isn't hard to imagine that more doctors will be recruited and many are fresh out of med school without much in funds or wanting to spend time on home maintenance, so condos have always been a viable option.
So I do believe that condos will still be desirable in the near future. Your focus should be on getting statistics on what condos have sold for and also learning about the managment company-- are there any assesments coming up (new roof, decks etc) and how much is in their kitty.
If you would like I would be happy to send you stats on condos sold as I have been a New Haven County agent since 1995 and focus on Woodbrige, Westville, Orange, Bethany, Milford, West Haven.
I have to diagree as well. The market is in a great place now for buyers. If your daughter is a first time buyer, she can get into a condo for little to no money (0% to 3%) down using a CHFA program. If you look at the trends over the last 100 years, this dip in the market is right on schedule. After that it will rise again.
If, in the unlikely event that the market is down in 3 years, she would always have the option of renting out the condo for a while to wait for a better market.
If you look at the potential appreciation, plus the principle paydown, plus the $7000-$10000 in tax deductions, less the lost money that would go to rent, it will most likely be gain to her at the end of 3 years.
If she would like to sit down and go over the numbers and look to see what is available that might interest her, I would be happy to help. I can be reached at (860) 736-1002 or firstname.lastname@example.org