Affording today’s housing market isn’t always so simple, which is why HOA fees aren’t easy to digest for some buyers. Today, I thought it would be cool to graph a few decades of association fees. I’ve never actually done this before, and while I know it’s total chaos, I think it’s also interesting. What are you seeing with buyers and HOA fees right now? Big deal or no biggie?
UPCOMING SPEAKING GIGS:
6/5/24 Marketing Mastermind (register here)
6/6/24 Golden 1 Credit Union
6/11/24 Elk Grove Regional MLS Meeting 8:30am
6/13/24 Sacramento Realtist Association (details TBA here)
6/21/24 Exporting data from MLS (details TBA)
7/9/24 Future Homes Q&A (private I think)
7/11/24 She Invests – REI Networking Group 6pm (register here)
9/17/24 Downtown Regional MLS Meeting Q&A 9am
9/20/24 How to Think Like an Appraiser class (details TBA)
10/18/24 Prime Real Estate (private)
10/29/24 Orangevale MLS Meeting
WHY IS CONDO VOLUME DOWN IN 2024?
Single family detached volume is up 5% in the region, but condo volume is down 5% this year so far. What’s going on? It could be a few things. Insurance woes with condos. Attached living with a tiny yard isn’t as appealing at current prices. Or maybe the HOA fee is less desirable in the midst of affordability challenges.
A PODCAST I DID & I’M NOT 20 YEARS OLD
If you need some background noise, here’s a podcast I did a few days ago with Marguerite Crespillo. This was a fun chat. And yes, there’s a serious age filter on the thumbnail that makes me look 20. Haha.
THIRTY-SIX THOUSAND UNITS
This graph is a HOT MESS, but this is what it looks like to have 36,000+ dots on one visual. Haha. These dots represent condo HOA fees in Sacramento County since 1998 based on MLS sales. The rise is obvious, but I created some neighborhood graphs to help see the trend more clearly.
THE FINE PRINT
These graphs show sales, so we’re limited to seeing what has sold instead of having information directly from an association. In short, we have enough information to see the big picture, but there are likely some MLS input errors too. I did weed out any fees that said zero.
WOODSIDE SIERRA
This condo development is currently selling in the lower $200,000s to the mid-$300,000s, but check out those HOA fees at $400+ per month lately. While condos are theoretically more affordable, the HOA fee can sometimes really inflate the monthly mortgage payment.
MOON CIRCLE IN FOLSOM
A look at this smaller condo development in Folsom on Moon Circle. It doesn’t look like a substantial increase when considering sixteen years, but the bulk of the increase is within the past eight years.
EMERGENCE OF LUXURY CONDOS
It’s rare to see condo fees above $600 per month in Sacramento, but here’s a look at some luxury condos that command a much different fee. I suspect the bulk of these are the Kimpton Sawyer Hotel in Downtown Sacramento (next to the arena). This is interesting as it shows sub-markets can emerge and buck the trend. I will say from a development standpoint, it takes guts to build something that is different in anticipation there is a market for the product.
GOLD RIVER
I included both condos and all detached units in Gold River, so this is a bit chaotic. It looks like all tiers have sort of changed at a similar level over the past ten years in particular. It’s interesting how some neighborhoods have a wide span of fees too.
BLUFF LANE IN FAIR OAKS
These are the condos on the bluffs overlooking the American River in Fair Oaks. HOA fees are hovering between $400 to $450-ish right now.
CASITAS MANZANITA IN CARMICHAEL
This development in Carmichael is often selling in the lower $300s lately, and the HOA fee is $300.
CAMPUS COMMONS
Here’s a look at all units listed as a condo in Campus Commons. There are a wide range of HOA fees in the neighborhood. Overall, it looks like the trend has been similar throughout fee tiers. And look at some of those fees pushing nearly $600.
POCKET GREENHAVEN
Here’s 25 years of condo sales in the Pocket / Greenhaven area.
THIS IS NOT ABOUT HATING HOA COMMUNITIES:
I wanted to clarify that this post is not being written from an anti-HOA perspective. This is more about affordability and the importance of considering some extra fees that buyers could be feeling more right now. That’s all. If you love your HOA, I’m happy for you. And if you despise the idea of an HOA, then enjoy something else if you can.
LET’S KEEP WATCHING:
Let’s keep our real estate antennas up and pay close attention to extras buyers are paying with things like HOA fees, Mello Roos, or insurance in outlying areas (or even in the suburbs).
Thanks for being here. I hope this was helpful.
Questions: What are you hearing from buyers about HOA fees right now? What do they like or not like? Any stories to share? What did I miss?
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This is an interesting, new analysis from you. Thanks for putting it together. It would be interesting to see how inflation tracks with HOA fees
Thanks Joe. I’m guessing quite a few situations have tracked with inflation or gone above a bit. For instance, $200 in March 1998 is now $386 today. Understandable to see an increase, but it stings at the moment…
The HOA that I live in has struggled to increase fees over the years due to voting requirements in the bylaws and limited participation/involvement. The dues have not kept up with inflation and the rising costs associated with maintaining our common areas. Now deferred maintenance is starting to stack up. I would rather pay higher dues and fix things but it’s a hard sell.
That’s a tough situation. The system is clearly not working. Gary for HOA president!!!!
So throw in some Mello Roos and a 30-year water bond at $50,000 per property not yet paid off, mix in a $400/HOA fee, what could possibly be an issue. Hmmmmmmmm
Exactly. These fees can really add up, especially when consumers feel about maxed out. This is where sellers really need to listen to buyers. Mike Delprete just had a great post about properties coming on the market too high. This is not going to apply to every market, but being realistic about price is key. https://www.mikedp.com/articles/2024/5/29/skyrocketing-delistings-and-the-pricing-imbalance
Insurance & The Balcony Law
SB-326 (aka The Balcony Law)—inspections have to be completed by January 2025 and many HOAs are discovering they are on the hook for HUGE costs to fix balconies, stairs, railings, etc. Before anyone buys into a condo or any HOA, check if these inspections & repairs have been completed.
Insurance costs are hitting HOAs hard and many of them in the Bay Area do not have adequate insurance which can be discovered during escrow and sometimes not discovered. Last year in an Oakland condo complex, 2 units closed in a week and the very next week deals fell apart because an underwriter determined the HOA was way under insured. HOAs are also getting dropped by insurance or seeing costs double/triple+.
Thank you Lorraine. I appreciate it. This is where a good budget and management can shine. It seems like so much of the narrative in housing right now comes back to insurance. Amazing to see.
HOA fees can definitely be a significant consideration for homeowners in Sacramento, especially if they’re becoming burdensome. Rising HOA fees can sometimes be attributed to increased maintenance costs, amenities, or other factors. It’s essential for homeowners to carefully review their HOA agreements and understand what services and amenities they’re paying for. In some cases, it might be worth discussing with the HOA board to see if there are any opportunities for reducing costs or reassessing the fee structure.
Thanks. I appreciate your take.
1) Increasing insurance
2) CA requirement to have a reserve study done every 3 years.
3) Fannie/Freddie financing requirements (post collapse of the Surfside condos in FL) that condo projects do not have significant deferred maintenance + an analysis to ensure adequate reserves to continue to maintain the project (projects with 5+ units)
All = higher HOA dues.
Thanks Larry. I keep hearing about insurance issues with condos. This is problematic. So far, we really haven’t had an oversupply of condo listings, but I’ll be watching supply and demand very carefully ahead.
Thanks, Ryan for your inaugural Condo/HOA report!
I do have to slightly argue the assertion that HOA due increases are out of hand.
In reviewing these charts, reflecting a 26-year period, showing HOA fees roughly doubling, the math shows a 2.77% annual increase.
I think most people would consider this increase to be relatively low when compared to the gains seen in most other products/services over a similar period….
But I will agree that a majority of the increases have been in recent years, which I think is the point you are trying to make!?
Thanks again, Jeff
Thanks Jeff. Yeah, I hear you. I think my premise here is HOA fees feel like a bigger deal due to affordability issues. When looking at growth, it looks like a bit above inflation over 25 years in many cases, and I don’t know that there is a big argument that it has grown exponentially beyond that. However, a $400+ fee right now feels like not a great situation in light of where prices are at, and that is likely giving some pause to buyers. That’s the issue, and it’s one reason to watch condo volume closely and listen to the stories from buyers about HOA fees. I think we are actually saying complementary things here. Make sense?
Hi Ryan,
Oak Pointe Hoa, in Auburn, CA current HOA $454
20% increase in July and another 20% forecasted in Jan 2025.
We are already 2.5 Million for balcony repairs. Each has paid roughly $42,500 for repairs and now we are informed there is no money for reserves.
Most people here are on fixed income an retired,
Can you figure out how to get us some relief out here. I wrote Governor Newson, with no reply.
Thank you.
Thank you for sharing Rene. I’m so sorry to hear about this. A 20% increase is no joke too. Where does that money come from? Was the budget not sufficient to cover the cost of repairs here? I just wonder why there are no reserves. I wish I had a solution for you. 🙁