Do HOA's protect property values?

Larry,

If you live next door to a property or on a street where multiple properties aren't kept in good order and repair, and you place your property on the market - it would be logical to expect fewer potential buyers then if you lived in a neighborhood where every property was well maintained. Fewer potential buyers may result in a need to have a lower asking price in order to entice more potential buyers in order to have one buy your property vs. one on the next block. Since one of the indications of property values is the price homes are sold for - an argument can certainly be made that HOAs, by enforcing rules that keep the lots well maintained, could increase property values.

Of course, there are a lot more issues that influence property values then just how well the neighboring properties are maintained. In my mind it's more of a marketing technique. As explained above, an HOA certainly might contribute to higher prices but there are too many other factors (like the local economy, foreclosures, length of time homes are on the market, etc.) that have a greater affect. Therefore, this should not be the sole reason to purchase within a coveted community overseen by an HOA.

HOA's are more of a life style choice. If you want to make sure that you don't live next door to someone who is a shade tree mechanic (not that their is anything wrong with that) or has a pink (or whatever color you don't like) house, you would be a prime customer for an HOA. If you believe that your property is yours and you can do whatever it is you want to do irregardless of what the neighbors think, your better off not purchasing property within a covenanted community.

For condominiums and some town home developments an HOA is almost required due to the shared common elements.

Tim

> HOA's are more of a life style choice.

I think this is the key. When people express a concern about property values they are most often, it seems to me, objecting to something that would make their life less pleasant.

It would be difficult to do a convincing study of property values because in many cases you would not be able to find comparable properties. Sometimes HOAs have higher density; sometimes common amenities; sometimes they were built in places where single houses would not be practical (because of drainage, sewage, roads, etc.).

If you are looking to buy you should decide whether the lifestyle is appropriate for you. And READ the CC&Rs to be sure you understand what you are buying.

If you want to make the argument that HOAs shouldn't exist because there's no evidence they help property values- well, the train has left the station on that one. They are here, and you get to make your choice whether they are for you or not.

It's a complex question and I have not seen any repeatable, definitive studies that show that an HOA "protects" property values (or increases them). There are, as you can tell, a lot of anecdotal feelings about HOAs (good and bad), but the plural of anecdote is not data.

It can be hard to compare between neighborhoods: HOA has 2300 sq foot homes, non HOA has 1750. HOA has swimming pool, non HOA does not. HOAs are closer to X, Non HOA's are farther (or vice versa). Or lot sizes, community areas, maintenance services, etc.. Because of this, one often ends up with bad comparisons, and people throwing out data that doesn't conform to their view (that HOA's are good or bad), which is not science.

It would be fascinating to find two identical neighborhoods, on opposite sides of a street, with homes made by the same builder, exact same amenities, same (general) location, etc., with one an HOA, the other not, and compare property values. I would also guess that would be impossible.

Also, as pointed out in previous answers to this question, even the word "value" can mean different things to different people. How much of what is "valued" in the price of a home is HOA derived, and how much is due to other factors (ie, location, zoning, city control, etc.). Secondly, in this valuation of a home (and increase in property value), do we factor the cost of the HOA over the non-HOA? For instance, if my HOA dues are $250/Month vs a similar Non HOA home, and I live there for two years, do we add the cost of my dues ($6,000 dollars in 2 years) to the cost/value/comparison? If my home was bought for $200,000, and now is worth $225,000, while a similar home (Non HOA) was bought for $200,000, and is now worth $220,000, did the HOA win? Or lose? Because it cost me $6K to gain $5K in valuation.

My opinion (which has nothing to back it up) is that HOA's should stop selling the idea that they protect property value (which really can't be statistically proven), and start selling themselves on the ideas that they help form better communities, neighborhoods, and provide X, Y, and Z services, and get into the business of making their HOA more friendly, livable, enjoyable, and value added to the shareholders who live there. After all, one of the most frequent complaints on these very boards are those owners who only bought to flip/rent, and don't care about the community, they are just in it for the profit. So why should an HOA turn around and sell themselves on a Profit Margin selling point? A home should be where you live, and raise a family, and enjoy life. If it's an investment, then you are very likely being a very poor businessman.

Just about everyone who buys a home is hoping to get more than just a roof over his head: he also sees his property as an investment and hopes that as the years go by his equity will grow. In some areas, northern Virginia, for example, homeowners have seen their equity grow by the tens of thousands of dollars in just a few short months. This is no small event. These homeowners expect that when it comes time to sell, they will experience massive windfalls, which will provide a substantial down payment on a future home. Many people talk as if their equity were more important than their 401(k) plans.

HOAs, by managing owners’ property, provide protection for this property value. If a homeowner cannot allow his grass to exceed a certain height, or leave an old car in his yard, or paint his house some outrageous color, or engage in some other behavior with unsightly results, then his neighbors need not fear the impact that such behavior will have on their house prices when they decide to sell. For years local governments have regulated neighborhoods in much the same way, through “code enforcement,” playing busybody and bully to keep up “community standards.” Strangely, this has met over the years with little complaint from homeowners — in fact, they have been a major force behind the passage of such “ordinances”. . . to protect their property values! “If you don’t like it, you can move,” is a popular refrain in defense of government controls.
At the very least, does not the same apply to HOAs?

Copied from an article:::

Jim

Short answer: Only under certain circumstances. In general there is no connection between HOAs and property values, there are only a few studies out there but all conclude that there is no connection. Number of foreclosures in an area is a much better indicator.
It's a sales tool for developers. Where city and county ordinances generally promote health and welfare of residents, HOA covenants can impact your lifestyle choices, and can go much further. You also have to be aware that those can change with or without your consent, depending on a certain percentage of home owners. So what you perceive as good for you today may change tomorrow, even if you have lived somewhere for 20 years. Since you cannot guarantee that your opinion will be heard, even if you are involved in your HOA, the only true way to make sure you can keep your property value and decide whatever you want to do with your property is not to live in an HOA.