By Deborah Goonan, Independent American Communities

 

Although the number of new homes sold in the U.S. has increased dramatically in recent years, the share of new HOA home sales as a percentage of all new construction home sales has been relatively modest, with trends that vary significantly by region.

Let’s take a look at data collected by the U.S. Census, to examine trends in new homes sales, and, in particular, sales of new homes in HOAs.

2009-2015 statistics for single family home sales in the U.S.

The Census table linked below provides the number of HOA homes sold as a percentage of all new homes built, 2009 – 2015. It also includes data on  national and regional trends. As you scroll through the report, you can see the percentage share of homes sold in HOAs by region, as well as distribution of HOA vs. not in HOA homes by price range.

On a national scale, from 2009 through 2015, overall new homes sales increased significantly, by more than 33%. And from 2011, when homes sales hit a low point, total new homes sales are up a whopping 64%.

Of total new home sales, approximately 71% of single family homes sold in 2015 were subject to HOA governance, compared to 62% of HOA homes in 2009, a 14.5% increase, with a Standard Error (SE) of 3%. Notably, the percentage share of new home sales in HOAs has remained relatively steady since 2012. At the market’s lowest point for new home sales in 2011, 66% of homes sold were governed by HOAs.

Regional sale trends

The data also indicate regional differences in sales of HOA homes. While the relative share of HOA new home sales increased somewhat in the South and West between 2009 and 2015, the percentage of HOA home sales in the Northeast decreased, and has remained relatively flat in the Midwest.

Specifically:

• In the Northeast, HOA home sales as a percentage of all new home sales decreased significantly from 47% in 2009 to 37% in 2015 (SE 8%). HOA sales peaked at 54% in 2014, after dropping to a low point of 41% in 2010.
• In the Midwest, HOA homes sales as a percentage of all new home sales represented 54% of total sales in 2009, and 56% in 2015 (SE 7%), indicating the share of HOA sales has remained relatively flat, within the range of standard error.
• In the South, HOA home sales as a percentage of all new home sales increased from 68% of total sales in 2009 to 77% in 2015 (SE 3%). HOA sales peaked at 83% in 2013.
• In the West, HOA home sales as a percentage of all new home sales increased from 60% of total sales in 2009 to 70% in 2015 (SE 6%). HOA sales peaked at 74% in 2013.

 

New home sales trends are closely related to new single family homes constructed for sale. (see additional references below)

Comparison of single family HOA homes built for sale by real estate developers vs. percentage of HOA homes sold, by region (2015):

Northeast: Share of new construction 40% vs. Share of homes sold 37%

Midwest: Share of new construction 59% vs. Share of homes sold 56%

South: Share of new construction 81% vs. Share of homes sold 77%

West: Share of new construction 71% vs. Share of homes sold 70%

 

Type of home, Attached vs. Detached

Attached new single family 

Analyzing Census data for sale by type of home, the vast majority of attached single family attached homes (townhouses) are governed by HOAs, generally in excess of 80%. In 2009, 13% of all new single family homes sold were attached. However, in 2015, attached single family homes represented only 10% of total home sales, indicating an apparent drop in popularity of townhouses.

Detached new single family

Looking at sales of detached single family homes, the percentage of HOA home sales as a percentage of all new home sales bottomed out at 59% in 2009, peaked at 71% in 2013, and dropped a bit to 69% as of 2015, within standard error range. (SE 3%)

South, West, and Midwest regions saw an increase in share of sales of new Single Family Detached HOA homes, although the increase was more modest in the Midwest, and more significant in the South and West. By contrast, the share of HOA sales in the Northeast region decreased.

Regional breakdowns for share of HOA vs. non-HOA detached new home sales, as a percentage of all new home sales

• Northeast – 28% HOA, 72% not in an HOA (compared to 33% HOA, 67% non-HOA in 2009, SE 8%)
• Midwest – 54% HOA, 46% not in an HOA (compared to 49% HOA, 51% non-HOA in 2009, SE 7%)
• South – 76% HOA, 24% not in an HOA (compared to 65% HOA, 35% non-HOA in 2009, SE 4%)
• West – 68% HOA, 32% not in an HOA (compared to 57% HOA, 43% non-HOA in 2009, SE 7%)

 

 

HOA sale trends by price range

New Single Family HOA homes sales also vary by sale price. Generally, the lower the sale price, the less likely the new home is to be governed by an HOA. There are some notable trends by price range:

Under $125,000: In 2015, only 18% of new homes sold were in HOAs, a substantial decrease from 2009, when 47% of homes were in an HOA, and 2011, when new Single Family HOA sales peaked at 52%. (SE 11%)

$125,000 – $149,999: The majority of new homes sold in this price range were not in HOAs. In 2015, 44% were HOA homes, a decrease from 59% of all new Single Family homes sold in 2009. New HOA home sales in this modest price range hit their high point at 68% in 2012. (SE 10%)

$150,000 – $199,999: At this price point, a slight majority of new Single Family home sales are governed by HOAs. But HOA new home sales at this price point are also taking a downward trend. In 2015, 56% of new home sales were in HOAs, down from 61% in 2009, and the peak of 69% in 2013. (SE 6%)

From 2009 – 2015, the number of New Single Family home sales priced below $200,000 has decreased dramatically.

Census data indicate that a home buyer in this more affordable price range was more likely to purchase a home that is not governed by an HOA.

 

When factoring in assessments and fees, a home located in an HOA is often less affordable. (See previous report, HOA assessments have increased at a rate much faster than the rise in home prices, and exceeding the rate of inflation.)

 

$200,000 – $749,999: As of 2015, 73%-80% of new Single Family homes sales were in HOAs, with a steady upward trend from 2009, when 62%-76% of sales were HOA homes.

$750,000 and up: In 2009, 47% of luxury Single Family homes were in HOAs, increasing to 69% of sales in 2015.

 

 

 

 

What effect has proliferation of association-governed communities had on home ownership rates?

For the following table, scroll down to see that the home ownership rate in 2017 is nearly the same as it was in 1965. Ironically, today’s home ownership rate remains even lower that the rate in 1973, the year Community Associations Institute (CAI) was established to help support the HOA industry.

U.S. home ownership rates peaked at 69.2% in 2004, then dropped back to 63.7% during the abrupt housing market correction.

From 1970 to 2015, according to CAI statistics, the number of housing units in some type of community association increased from less than 1 million to more than 26 million. CAI estimates roughly 21 million housing units at the time the rate of home ownership peaked in 2004.

Looking at the big picture and long-term economic trends, it appears that housing policy favoring HOAs has had no net beneficial effect on home ownership rates.

 

 

Additional References:

Single Family (SF) Homes, New Construction for sale – percentage of homes in homeowners associations (HOAs) is leveling off

Percentage of new construction of SF homes in the U.S. for sale remained steady at 73% for 2015 (no change from 2014) with Relative Standard Error (RSE) of 3%.

 

Historically, since 2009 (the first year data for HOA new construction was collected for the US Census), HOA construction has increased 18%, with the bulk of that increase coming from new construction in the Southern and Western regions.

Source: Homeowners’ Association for new Single Family houses completed for sale

https://www.census.gov/construction/chars/pdf/association.pdf

 

Single Family (SF) construction trends since 1973

Number of new construction SF units:

1973 – 731,000

2006 – 1,293,000 PEAK

2011 – 291,000 LOW

2015 – 477,000

Construction of SF units is down 35% from 1973; down 63% from peak construction of 2006. New construction has increased by 64% from 2011 levels, but remains well below historical averages. RSE 4%.

Source: Number of Bedrooms in Single Family Houses Completed: Built For Sale 

https://www.census.gov/construction/chars/pdf/bedrooms.pdf