HOAs and affordable housing — Say what??

Are HOA Dues Making Real Estate Unaffordable?  Read this very instructive analysis.

Let’s imagine that a lender allows 31 percent of your income for housing-related costs, and that two buyers have a combined income of $6,000 per month.

This means up to $1,860 can be spent on the mortgage, insurance, property taxes and HOA or condo fees. If insurance costs $100 per month and taxes are $300 per month, then the borrower has $1,460 available for mortgage payments.

Based on income, you’d probably qualify for a 4.25 percent, 30-year, fixed rate mortgage for roughly $296,750.

Add $270 in HOA dues, and just $1,190 is available for mortgage payments — the loan amount falls to 241,900– $54,850 less, enough to make many properties unaffordable and off-limits.

There’s an impact of HOA dues on size of mortgage you can qualify for. Obviously you get less when HOA dues enter the picture. So, why are the pro-HOA proponents still talking about HOAs as affordable housing? Why?

Where’s the full disclosure Isn’t this false advertising and misrepresentation?

 

 

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Published in: on December 15, 2016 at 11:05 am  Comments (3)  

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3 CommentsLeave a comment

  1. Excellent information.

    Nobody likes to admit they’ve been duped. It is painful. Many have fallen for the HOA con.

    I lived in my townhome/community for years before purchase. I didn’t know about reserve funding or managing parties’ conflicts of interests. I wanted someone else to do the work.

    “I am still learning” —Michelangelo

  2. Ask the HOA indsutry how they define affordability. Usually, they will claim the purchase price is lower because you are buying into shared ownership. Most often, that means a small condo, townhouse, manufactured home, or possibly even a detached “villa” or “patio home.” You know, the kind of single family home that’s less than and arm’s length from your neighbor’s house.

    But what CAI, NAHB, and ULI fail to mention or consider is whether this type of property is actually affordable to own.

    A low up-front price often equates to low quality workmanship and materials. Over time, that means your home and the common elements will wear out sooner and/or are more likely to show signs of defects. So within less than a decade, owners of “affordable” housing are looking at substantial assessment increases. If a significant number of owners who stretched to pay for these homes find it difficult or impossible to pay assessments that have doubled or tripled, then the condition of the housing and grounds, thus the association, will rapidly decline. And that, in turn, leads to falling property values. At that point, owners have MORE expense to upkeep their homes, but LESS equity (or no equity) to show for it.

    The other dynamic at play is that often the low-end condo units end up being owned by absentee landlords who bleed the association dry, by collecting as much rent as possible and putting back very little money into the association’s reserve or capital funds.

    When Owner-occupants are in the minority, their home becomes unaffordable, poorly maintained, and unsellable.

    But hey, it was affordable to buy!

  3. Very unaffordable when factoring in HOA embezzlement & fraud foreclosures! Not to mention destroyed credit for 10 years! Our home and retirement (equity) were stolen by unprosecuted HOA fraud at Lakeside Plaza HOA Reno, Nevada. Never again, Nevada. Boycott Nevada HOAs.


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