The Good, The Bad and The HOA

I like stats. I know, it’s geeky but I sincerely do. Most of the time stats don’t take into consideration the emotional side of things but they give you a glance of reality without emotions, meaning; by numbers two areas may look pretty much alike when it comes to home prices, demographics and socioeconomic structure, looking at employment, level of education and income, yet they may be very different in their feel in many ways. But I do love my numbers, if you have not noticed. So, I keep talking about inventory and absorption of inventory, as those numbers do give an idea on what the market looks like. So many times when I'm approach by a real estate related questions, I turn to stats. 

Last night I was approached by the question of HOA dues. Are they low or are they high? Should it be presumed that they will go up, or is it more likely that they stay the same? What should be expected?  Great question by the way, and for those that don’t live within a Home Owners Association, the HOA dues can be somewhat a mystery with a lot of false perceptions too.

A Home Owners Association is usually considered to be something that you run into when buying a condo or a townhome, and to some it comes as a surprise that a single-family home can also be a part of an HOA. Even though they all work the same way, they are still different in many ways. When it comes to a condo, you practically own an area of air, that flat on third floor on the west side of the building. You may or may not own your parking spot as with some condos you rent your parking spot. The HOA is in charge of the common areas, such as the hallways, stairs, elevators, rooftop gardens, and other common areas as well as maintaining the parking garage even if you own your very own spot in there. Due to this the HOA fees in condos tend to be higher that in residential areas.

Many times, an HOA in residential areas is referred to as something borderline evil, as they come with CC&Rs (Covenants, Conditions & Restrictions) rules on how you may use your home and the surrounding areas. The rules and regulations may seem restrictive but they are there to protect the neighborhood and the home values. Yes, you have to take care of your yard and hide those trash cans, but those same regulations also make sure that your neighbor won’t open a certain kind of business next to your home, or park their RV or boat in front of your house for the summer. The HOA takes care of you, and the value of the land with the dwelling on it also known as your home.

Within an Home Owners Association, you usually pay a monthly fee. What the money is used for differs quite a bit as well as the amount of money you pay. More that the question about the fee itself, it should at least equally be about what it covers. How large are the common areas? What do they include? Does your area have a swimming pool or a club house to maintain? Is your HOA maybe paying for water and sewer? Is the only thing that your HOA maintains some lawns, shrubbery and maybe a small playground? Well, you HOA dues are most likely not very high. But if you live within an association that maintains your private yard for you, has a pool and a club house, you can expect to be paying a heftier fee.

Can the fees then just skyrocket? No. Your HOA dues won’t go up without a good explanation for why they need to do that. Are there may be some major repairs that need to be done? It is an association governed by a board that the member of the association chooses by election. So yes, everyone has a say. Adding major improvements is even harder as the member of an HOA would have to vote for those and it takes way more to get a new sports field, clubhouse or pool approved, rather than repairing something that is already there.

Looking at those stats then. What is a standard HOA due. The nationwide average ranges between $200-$400/month, but it does not differentiate between condos and residential homes. Also, the housing market varies by state and the HOAs deal with different climates so I would not rely on a nationwide average.

Before I start, I want to point out that there is no way for me to know what these fees cover without ordering a title with CC&Rs for each home, and as that is not feasible we are looking at just numbers without knowing the differences on what those amounts actually buy you. Some of them may be some basic mowing and the other is paying for the community pool, your yard work and several parks. I am also unable to see if those dues are covering for repairs of the common areas and are just temporary.

I looked at homes for sale within four school districts (Bellevue, Issaquah, Northshore and Lake Washington) with square footage ranging between 1,600 and 4,500, at least 2 bedrooms, with the additional criteria of not being a condo but still being part of an HOA.

I randomly took 50 first homes regardless of their age, and this is what I found out:

The homes that I looked at were built between 1950 and 2017. The average construction year was 1997, and the median construction year was 1999.

HOA dues for these homes were from $10 to $613 per month. Average due was $84 and median $55.

Looking at these numbers, the HOA dues of my own neighborhood are above the median, but under the average. I have lived in this community since 2010 and the dues have not changed during those years, for the first years though, we only paid our dues for 9 months of the year, not the entire year. So, one might say our rates have gone up from $56.25 to $75. The original plan was that the rate was set for future years and as the community wasn’t fully built we got excused for those 3 months. So, it was set for $75, even if it really only needed to be $56 at that point. 

This does not answer to the question of how likely it is for HOA dues to skyrocket, and as I cannot see into the future, I can only look at what I see and make predictions based on that. I will use dues for my neighborhood for this, as that is the one I know the best, have access to the CC&R, and know the history.

We live within a relatively large HOA with nearly 700 homes. I mean there are HOAs with 5 to 10 homes, so ours is big. We have quite a lot of amenities, dog parks, playgrounds and sports fields, but we also have a lot of homes paying for those. The monthly fee of $75 seems to me that it is well in line with the average and median HOA fees, and thus the likelihood that it will be raised in the near future seems slim. Also, even a dollar per month with nearly 700 homes is over $8,000 per year.

The second part of the question was not phrased as fairness, but did include it if you read between the lines. Is it fair that everyone pays the same amount regardless of the size of their home? Well, there are HOAs where you pay dues based on the size of your home, but as the common areas are used not by the size of one’s home but by the wish of one to be using those areas, I don’t see it being unfair even if the 4,500 sq ft home pays the same fee as the 1,800 sq ft home. Everyone gets to enjoy the amenities as well as the landscaping equally, regardless the size or price of their home. Isn’t that beautiful!

All of the above pictures reflect on what my HOA offers my family.