The new Trulia report released yesterday via blog with the headline “Attack of the Killer HOA Fees” had some great statistics. The yin-yang of the headline and statistics balanced out and I read on….
The headline and statistics were from a recent blogger from Trulia, Mark Uh. According to Wikipedia, Trulia is an online residential real estate site for home buyers, sellers, renters and real estate professionals in the United States. It lists properties for sale and rent as well as tools and information needed to be successful in the home search process. Trulia was purchased by Zillow in 2014.
The blog provides some incredibly helpful information about (community) association assessments and trends. The blog uses the terminology “homeowner associations” and I am guessing the data presented is for condominium associations and homeowner associations. Nonetheless, according to the blog, the average HOA fees have been rising steadily since 2015. The blogger compares assessments to home values and states “HOA fees increase outpaced home prices.” Those of us in the business of community association operations recognize why home values dipped from 2008-2012 during the recession while association assessments increased. Home values dropped or the housing market crashed. Unemployment soared which caused people to stop paying their mortgage (and their assessments) and people with second homes abandoned their second homes (and their obligation to pay the association assessment). Those remaining in the community were saddled with the responsibility to pay for the deficit created by the owners who abandoned their home (and their assessments). This is an excellent data-driven example of why community associations need to have the ability to initiate housing recovery in their community using priority lien statutes when homes are abandoned or in a situation where the bank has stalled foreclosure.
In addition, one of the reasons assessments didn’t decline like home values is because the community still had to provide the same level of service (with less money) to the residents. The trash was picked up, snow removed, insurance paid, streets paved, sidewalks and lighting maintained, and more. The municipal-like services continued to be delivered.
The report identifies assessments are higher in older buildings, which is not surprising. Older buildings require capital improvements as the useful life of some of the components like heating and air condition systems, elevators, roofs, windows, etc.… are in need of replacement or repair. Unfortunately, community associations have a difficult time convincing owners they should save for capital improvements. This is not unlike saving for retirement. Most people don’t save enough money early enough to adequately cover cost of living in their retirement years. It is the same in a condominium building, residents need to start saving a little at a time early on or the assessments will be higher as the building ages.
The report indicates the average assessment of the top 50 metropolitan areas in the U.S. is $331. The report goes even further into identifying specific geographical trends and assessments. The data in the report is excellent – too bad the headline puts a negative spin on homeowners associations. After all, we know that the majority of people living in their community association are satisfied with their community, their board, and their manager and that their assessments are protecting their property values. Here is a link to the Trulia blog – take a look.