Shared by Deborah Goonan, Independent American Communities
It’s official. Now the experts are starting to acknowledge that the cost of living in Association-Governed Residential Communities may actually reduce affordability of homeownership.
Zillow Senior Economist Aaron Terraza explains in this article:
The Growing Footprint of Homeowner Association Fees
Excerpts from the article:
New homes are much more likely than older homes to include monthly HOA fees. Just 1 percent of those living in a single-family home built in the 1950s or earlier pay a monthly HOA fee, compared to 41 percent of single-family residence owners in homes built since 2008 (figure 1). Among homeowners in multifamily residences, 58 percent of households living in buildings built in the 1950s have monthly HOA or condo fees, compared to 88 percent of households in buildings constructed since 2008.
(click on image to enlarge)
Consider a hypothetical homebuyer armed with a 20 percent down payment and looking at a $250,000 condo. They’ve qualified for a 30-year, fixed-rate mortgage at a 4 percent interest rate, and have an annual household income of $50,000. This homebuyer’s monthly housing costs would be about $955 for the mortgage payment alone, or about 23 percent of their monthly income. But adding the typical monthly condo fee of $305 on top of the mortgage payment brings the homebuyer’s monthly housing costs to $1,260, or 30 percent of monthly income.
What may initially seem like an afterthought can make a substantial difference in affordability.
It’s worth noting that this economic analysis only looks at average monthly assessments. It doesn’t account for special assessments. A 2013 survey by the Foundation for Community Association Research found that 1 in 5 Associations issued a special assessment in the previous 5 years, to cover necessary expenses that were not funded by reserves. Another one-third of Associations signficantly increased monthly assessments to pay for major repairs and replacements.
Since condominium associations tend to have significantly larger assessments, further increases or special assessments on top of regular montly assessments create a significant effect on affordabilty, especially for first-time buyers and retired seniors living on fixed incomes.