Are homeowners, condo associations in a period of market decline?

Analyzing the HOA “product” from a business point of view

By Deborah Goonan, Independent American Communities


Anyone who has taken an introductory course in Marketing or Economics is familiar with the concept of Product Life Cyle. The business theory breaks down the life cycle of a product into four stages: Introduction, Growth, Maturity, and Decline.

Quick MBA, a website is administered by the Internet Center for Management and Business Administration, Inc., provides a simple, concise explanation of those 4 stages.

In summary, a new product is introduced and heavily promoted. If consumers accept the product, its market grows at a rapid pace. As the product matures, consumer tastes change, competing products enter the market, and the rate of production and sales begins to level off. At some point, the product itself becomes obsolete or less desirable than competing products, and the market declines.


How does the product life cycle theory apply to association-governed, common interest communities?

To be clear, common interest communities governed by homeowner, condominium, and cooperative associations are actually a hybrid mix of physical product (the built environment of the community, including the housing and its associated common property) and a collection of administrative and maintenance services (the functions of the HOA board of directors, with or without the help of management agents).

Nevertheless, the HOA housing model has indeed followed a similar life cycle.

Introduction occurred in a few early 20th century garden cities, and slowly began to take root in 1960s, with the introduction of condominiums and voluntary property owner associations in vacation and retirement communities.




By the early 1970s, home builders, lenders, real estate investors, Housing and Urban Development (HUD), and the Urban Land Institute combined efforts to create a trade group known as Community Associations Institute (CAI). Spurred by government backed mortgage lending, the HOA industry experienced its most dramatic period of growth between 1980 – 1990, according to statistical estimates provided by CAI.

1970-1980 Introduction, shift from condominiums to suburban single family subdivisions

26,000 new communities – average of 2,600 per year

2.9 million housing units added – average of 290,000 per year (111.5 units per community)

7.5 million residents added – average of 750,000 per year (2.67 residents per housing unit as of 1980)


1980 – 1990 Peak growth period

94,000 new communities – average of 9,400 per year

8 million housing units added – average of 800,000 per year (85 units per community)

20 million residents added – average of 2 million per year (2.55 residents per new housing unit as of 1990)


However, from 1990-2000, the rate of growth, although still strong, began to decline, indicating an HOA market reaching its maturity stage. A recession in the 1990s dampened the housing market. Developers began to emphasize exclusive, integrated community amenities and active adult or retirement communities.

1990- 2000 Approaching Maturity – golf course, gated communities, and age restricted community product lines added

92,500 new communities – average of 9,250 per year

6.2 million housing units added – average of 620,000 per year (67 units per community)

15.6 million residents added – average of 1.56 million per year (2.54 residents per housing unit as of 2000)


From 2000-2006, in the years leading up to the now infamous real estate market crash and foreclosure crisis, the HOA housing market shifted. While the average annual number of new housing units added increased 42%, the number of new communities and the rate of residency decreased by 17% and 24% respectively.

2000-2006  The push for housing density, lax lending standards, privatization of affordable housing, apartment to condominium conversions

46,000 new communities – average of 7,666 per year

5.3 million new units added – average of 883,333 per year (115 units per community)

11.8 million residents added – average of 1.18 million per year (2.47 residents per housing unit as of 2006)



During and following the most recent deep recession, the rate of growth for new HOA communities and housing units is down by 25% and 61% respectively, showing signs of market decline. Growth in residency has remained relatively unchanged, while size of HOA households has increased by about 5%.

2006-2015 New construction stops, then makes a weak recovery, leading to housing shortage, especially for low and middle income households. Industry push for condo to apartment conversions. Developers abandon unfinished single family subdivisions. Golf and 55+ communities struggle financially. Many seek conversion of amenities and common property for new purposes such as mixed use, townhouse condominiums, and agrihoods. None of these options attracts widespread appeal.

52,000 new communities – average of 5,778 per year

3.1 million new units added – average of 344,444 per year (60 units per community)

11 million residents added – average of 1.22 million per year (2.6 residents per housing unit as of 2015)


CAI’s statistics only tell part of the story.

As explained in a previous post, Census data indicates that construction and sale of multifamily condominiums has declined in the past decade, and construction and sale of new single family homes in HOAs – as a share of all new construction – remains steady. Most of the market share decrease in new construction of HOA property is in the northeast and midwestern regions of the U.S.

And market research conducted by the National Association of Home Builders – represented mostly by small and mid-sized companies – indicates that common interest community amenities are relatively unpopular, and that home buyers prefer single family suburban living to densely packed urban condominiums in mixed use settings.

And CAI cannot hide from the obvious fact that most Condominium associations, as well as many mature homeowner associations are transitioning from owner-occupied to renter-occupied – even short-term rental communities.

Instead of traditional home buyers, real estate investors are purchasing many HOA properties, indicating that the industry is in the process of leveraging reliable niche markets, and re-purposing or liquidating common interest assets – all very clear indications of market decline in the association-governed housing market.

Most notably, HOA market decline is occuring despite a decades-long political push for common interest development at the local level.

1 thought on “Are homeowners, condo associations in a period of market decline?

  1. Well said, Deborah. As for the Factbook,

    “Facts are the enemy of truth,” so said Don Quixote in the play, Man of La Mancha, in response to the Inquisitor’s demand for facts. More recently on the AM news talk shows, a quest commented sarcastically that, “Everyone is entitled to their facts.” It was OK if you are a believer in political correctness.

    But my preliminary analysis of the “facts” (originally performed 10 years ago in 2007) raised some quirky looking “facts.” The Factbook is an overbearing marketing and promotional document for HOAs and CAI’s role, has loads of US Census data, and has CAI’s own estimates on HOAs (the Census doesn’t record this info). The value of its “facts” relating to HOAs is directly related to the validity and reliability of its estimates.

    However, the Factbook does not show a history of CAI membership growth. I wonder why? Does anyone have this history on CAI membership?

    I will continue with a more detailed analysis to be published later.

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