You have received many good answers from my colleagues but I will chime in with my 2 cents as well.
I have worked in the Laguna Niguel area over 11 years and I can't recall a home owner's association (HOA) lowering their dues. The dues are to support many and various items; the common area maintenance of the landscaping, the entrances and those nice features residents get to use, like the pool, spa, and other recreation facilities (whatever they are). They also pay the bills of the utilities used to support these common use facilities. There have electricity, gas, water costs just as you have at home. Basically the HOA is a business that is run by a management company (who also wants to get paid).
Besides the normal items mentioned above, another recent stress are caused by delinquent home owners may force the dues up. To answer your question (finally) I am uncertain how inventories really affect the overall dues alone. The larger impact that I see right now is based on the non-paying owners. This is a vicious circle, the homeowner, has some hardship and can't pay his dues, the HOA then has to go deeper into their reserves to pay their obligations and if this happens to enough owners, in time, the HOA may have to raise the dues for all home owners.
Once in escrow you will receive a packet from the HOA via escrow with 12 months of meeting minutes and more. This should give you an idea as to the number of home owners that are behind in their dues. You will also be able to see how much they have in reserves and if there are any law suits pending. You will have time in your discovery period (17 days by default) to review this information and if not satisfied then you can cancel the escrow and get out of the deal.
If you have any other questions and aren't already working with one of the other Realtors from this thread then give me a call, Brian Wilson 949-933-0852.
Actually, it could have the opposite effect. While it's impossible to determine what each individual community will do, vacancies tend to put pressure on HOA's and their boards to raise dues in order to compensate. Having said that, inventories seem to be relatively consistent month to month (This can obviously change anytime). Overall, most communities try to keep dues as reasonable as possible. Vacant units and non-paying homeowners put a lot of pressure on a community to raise dues.
Feel free to call anytime with any additional questions or concerns.
Rob Magnotta 714.330.9558
If you need any assistance locating some great investment properties or one for you to live in, in any of these areas please let me know. The city of Orange is another option for you, where you can get newer condos built after 1995 & not have to deal with any Mello Roos. In Laguna Niguel, you'll probably have a Mello Roos tax on top of an HOA fee.
Please email me directly if you'd like to talk & make a plan.
Realtor Since 1996
Main Street Realtors
HOA's also need to increase reserves to satisfy new lender requirments, so beyond the expense side, the HOA has to prove adequate reserves set aside to handle future capital improvments. An HOA that is more per month, but has a good reserve position is better than a low monthly HOA fee on the brink of insolvency! There are HOA disclosure forms to find out owner occupancy rates vs tenancy, owner delinquency rates and number of foreclosures in the development. Also fewer and fewer HOA's allow you to rent the unit because FHA encourages owner occupancy. Harder to get mortgage money for a struggling HOA community.
I doubt your HOA will decrease, given the increase in costs for labor, materials etc. that seems to go up every day. If you think of the HOA as a substitute for what you would pay on a home (gardener,pool maintainence,painter, roofer, health club) it probably equals the same.
OC Homes Realty
Very rarely do HOA fees decrease...and frankly as our housing crisis continues to work itself out, I would expect them to rise. The short sales are not paying HOA dues (normally) and this causes a strain on the other homeowners. Many HOAs have raised their rates to compensate and try and build a reserve which can handle these kinds of stresses.
The one thing you might want to check on specific properties is the reason for the HOA number....often there will be a "special assessment" issued to pay for specific issues. Such as re-roofing the complex.....everyone would pay $100/month for 3 years instead of a one time check of $3600. This raises the HOA amount...but only for a period of time. Often this must be paid off at the close as well...so that might make a $435/month HOA more like $335/month...does that make sense?
A good buyer's agent can help you with this....we know which complexes have issues and which might have special assessments. It can shed some light on that for you.
If you plan on financing your purchase, condos are becoming more difficult. If inventories rise, it will be that much harder. Currently, one of the "rules" for condos is no more than 15% of the units can be in default of their HOA fees.
Happy funding, Rudi
If you're asking because you hope to avoid the problems of an HOA that is struggling, you can request the financial documents from the HOA management company.
There have been bankruptcies of HOAs. I've heard that a community in northern California is attempting to disband an HOA. It happens.
You might have read the other day that HOAs have come under the spotlight of the press because they are foreclosing to collect on delinquent fees. More worrisome is home values keep falling and more homeowners elect to walk on their mortgages. The most recent word on this is the number of strategic defaults declined this year. Financial instability of HOAs has become more widespread because the foreclosure process has been extended for a variety of reasons, including bottlenecks in the courts in Florida and maybe more attempts at short sale and mortgage modifications everywhere. The extended stay sometimes has people neglecting to pay their HOA dues. These homeowners shouldn't assume they can do that if they are pursuing a modification. The lender isn't about to modify a mortgage for someone who has exposed the home to a lien.
The HOAs, if they are run by boards like the ones I know, are not anxious to foreclose. So, they come up with other ways to keep the HOA solvent. Some have sought more competitive bids on services they contract. But, placing liens and foreclosing is a last resort. They are also reluctant to pass along the costs of delinquent payments onto the members. But, that is happening.
HOAs manage insurance for things like roofs for condominium owners. So, it is important that you have that information.
PML of Longmont, CO
It is not likely that the HOA feeds will go down. The fees are there to support the community costs of keeping up all the amenities and extras like landscaping, maintenance of the common grounds. I have seen some fees come down but that is not based on the inventory. It is a decision made by the board of the HOA. In fact some HOA fees may go up as more property owners default on their HOA payments. In general the less things that the association is responsible for, the lower the HOA fees. If you'd like me to get you more information on HOA fees in the areas you like please let me know.
The cost of providing utilities, insurance, maintenance, amenities such as pools and gyms and elevators, and the cost of repairs and replacement items that will be paid from the reserve fund are not going to go down in this lifetime or the next.
All the best,
As all your answers indicated, there is no relativity between inventories and HOA's fees. Since the cost of almost everything is rising, it is more possible that HOA's will increase rather then decrease. Also there are many delinquencies are involved in HOA fees in almost all the communities that the other homeowners are being suffered by increase their fees to keep the maintenance budget of the complex. Also, if you would get a loan on your future purchase, the lender would make sure about the compatibility of the HOA budgets to be able to loan on the unit. To answer your question, No, it will not decrease but your lender will make sure that everything is in line about that HOA before they loan you the money. Please call me if you have more questions.
Best of luck
Interesting question. I've noticed a 40% increase of HOA fees in many parts of Orange County. I don't see a direct relationship with HOA fee increases to housing inventory unless that inventory is primarily comprised of homeowners who aren't paying their HOA fees. When looking for a condo it is good to be aware of how financially solvent the HOA is. Lenders will want this info as well to determine whether or not they will lend in that community.
That would be highly unlikely - in fact just the opposite might be true. As inventory continues to rise and Foreclosures and Short Sales rise also, the number of homeowners NOT paying their monthly dues is increasing. As a result, the HOA has less income to pay their bills - so just like the US Gov't they may need to increase HOA fees just to cover their expenses.
Another way to look at it would be:
Let's say the HOA has 100 units (homes) and the fee is $100 / month per unit = $10,000 per month or $120,000 per year. Then let's say 15 of the units have NOT been paying their HOA for the past 10 months; 15 x $100 x 10 = $15,000 (Loss). The HOA has to make that money up someplace as they are now collecting only $8,500 per month or $102,000 per year - that's an $18,000 loss per year. So, That original $120,000 per year the HOA NEEDS to support the development now has to be split among the units they expect to pay on an ongoing basis. Therefore, the original $100 / month will now have to be at least $118 per month to sustain the development.
I think this is the next BIG problem in Southern CA. There are so many condo / HOA developments where a large number of homeowners have stopped paying, the fees will have to be increased and/or a one time levy per unit will need to be assessed which could cause an HOA to fail.
For all of those homeowners that are not paying, many will file Bankruptcy and the HOA will never collect. Some HOAs are filing liens, but they are not keeping up to date as the amount increases.
I recently had a short sale where the sellers had not paid their HOA in almost 3 years - they filed BK and more than $20,000 owed got wiped-out. It was a well-funded HOA - BUT - they are starting to see financial issues due to so many homeowners not paying.
The key thing to understand is to check out the HOA PRIOR TO BUYING !
Best of Luck,
Broker / Owner & Certified HAFA Specialist
Thom Colby Properties
Newport Beach, CA
Moving Lives Forward (TM)
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Best to inquire the history of the Association due increases over the past few years to give you and idea
what to expect. But if a major repair comes up in the complex expect a spike or a one time charge.
Some Associations also have a maximum limit of how much they could go up.
If you have any other questions feel free to contact me anytime.
It's unlikely that an increase in condo inventory would result in a decrease of HOA dues. Some HOAs are experiencing financial troubles because homeowners who are in foreclosure or doing short sales may not pay their dues. Increased inventory would be more likely to impact prices.
If you want to check all available condos in Huntington Beach, Laguna Niguel, or other areas, visit our website. Let me know if you have any other questions you can answer.
Keller Williams Realty