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Posted by on Feb 24, 2008 in Thinking of Buying?, Thinking of Selling? | 20 comments | Print Print

HOA & Mello-Roos Fees

The newer tract homes are being hit pretty hard by short sales and foreclosures. The builders’ in-house mortgage company, who has no legal obligation to protect the borrowers, had incentive to jam buyers with any loan possible to keep sales afloat.

As a result, we are seeing homeowners fleeing, especially those who bought and/or borrowed in 2005. While the high payments driven by exotic financing are the primary causes for the foreclosures/short sales, the problem is further exacerbated by the outrageous HOA and Mello-Roos fees. Don’t be surprised if the tracts built around 2005 end up having some of the worst foreclosures totals, and furthest drops in values.

Here is the chart of HOA & Mello-Roos fees, and the number of active listings that are REOs/Short Sales:

Tract Name   Mo. HOA fees   Mo. Mello-Roos   REOs/Short Sales
Carlsbad Area
Bressi $196-$205 $215-$288 0/11
Calaveras $95-$130 $74-$185 0/2
SnEljoHlls $80-$157 $137-$424 3/32
LC Greens $250-$306 $167-$246 0/4
LC Oaks $233 $67 0/6
LC Ridge $263 $170 0/0
LC Valley $100 $75 0/1
CV Area
Arabella $210 $221 0/0
Del Sur $119-$338 $332-$758 0/1
Derby Hill $100 $104 0/0
4S $70-$153 $300-$425 2/17
Portico $166 $268 0/2
Santaluz $425 $466-$1K 1/6
Santa Rosa $55-$210 $385 0/0
Santa Barb $106 $104 0/0

My general rule-of-thumb is that buyers will tolerate HOA and Mello-Roos fees that are under $200/month, combined – above that, and the sales price better be very attractive.

In tract neighborhoods, the house values are married to the comps, because they are so similar. When one takes a hit on value, so do all the neighbors. Add in the high HOA fees and Mello-Roos and you can figure that the values in the newer tracts are likely to get hit harder and longer than the older neighborhoods. When it comes to buying, the more unique, the better!


  1. HOA & Mello-Roos are going to be a double burden going forward. The price will need to be lower to acknowledge the lower value as JtR said but they will also suffer a dearth of potential buyers. There are a bunch or strange people like me who just plain old don’t want to consider houses with these burdens. Two years ago that didn’t matter, we were a minority. Now things are different because we are a greater portion of the potential buying public. Not only that you can just bet that all those short sales above are creating a class of "never again" families who won’t forget being bled dry by these expenses.

  2. HOA+MelloRoos+PropertyTax = Rent

  3. Jim Can you do the same thing for downtown condos, their HOA are even crazier.

  4. How about Del Sur? You didn’t mention that community. Their Melo is crazy high.

  5. Jim I’m so glad you brought up this subject.

    I looked at LC Ridge homes, and couldn’t figure out why the HOA’s are $263/mo with no pool, clubhouse, gym, etc. What is that fee for – to make sure the icelplant doesn’t grow out of hand?

    Anonymous, I just moved out of a downtown high rise condo I was renting, where HOA’s are $750/mo. That’s standard for downtown. Taking on those HOA’s is the monthly equivalent of an extra $100k mortgage. Some of those condos are really beautiful, but I’d never buy anything with such high HOA’s.

    There’s something shady about these HOA’s. I’m surprised there hasn’t been more scrutiny here. I can’t help but believe there’s some skimming going on out there.

    Yet, people have signed up left and right to pay these dues on top of the over inflated house prices. I guess once you decide to buy a house at a price you can’t afford, why not tack on an extra $250-$750/mo in HOA’s? What’s the difference?

    I think some of these fees are crazy but apparently I’m the crazy one and everyone else is normal. Maybe I’m doomed to be a renter forever . . .

  6. I added Del Sur – on all of these I only pick up those listings that have the subdivision listed as such, some agents may leave them out.

    Blur – funny you should bring it up – I think that, because each model home has $250,000 in furniture and upgrades, the buyers get in a daze at the sales desk, crazy in love with what they’ve seen – and have to have it.

    The ego is a powerful thing.

  7. Blur – your iceplant comment is right on the money. That’s exactly what they do. That plus raising the fee every year. To me that’s the scary part.

    Jim – The woman is the powerful thing.

  8. IMHO, the price should be lowered to reflect the additional costs of HOA and MR fees. Of course, some people seem to think HOAs are a benefit, so perhaps they think it’s worth paying extra for it.

    I’m with Rob. Rather have an old house on a large lot, free of unnecessary encumbrances. Thank goodness we’re all different.

  9. I think the HOA fees are the icing on the cake for the builder. They can sell it all off as an annuity package to a "management" company. Lump sum cashout at closeout! I have been the hearing the term "lynching" in the media a lot recently, just not in the same segment as the housing bust. Probably should be, however.

  10. Off-topic: latest offering from Voice of S.D.

    Carmel Valley Attempts to Keep Its Housing Strong

    On a recent afternoon drive through the community, Klinge pointed out the way the subdivisions settled in one after another as developers followed Pardee’s initial development of the Del Mar Highlands subdivision in the 1980s.

  11. There are 2 REO SFRs currently listed for sale in San Elijo Hills (3 if you include Old Creek Ranch): 930 Tularosa, 1009 Brightwood, 1889 Shadetree.

    The interesting part, though, is that, according to, there are 7 unlisted and 3 pending REOs in the SEH.

  12. SD Scientist,

    I searched by subdivision, looking at those marked as in "San Elijo Hills" – not surprised that some agents put in something else. Agreed too, that more are brewing, I know of a handful.

    If you figure that there are 32 short sales on the market, that’s probably 30 foreclosures coming right there, unless the agents start lowering the price to effect a sale.

  13. CA Renter,
    >>IMHO, the price should be lowered to reflect the additional costs of HOA and MR fees

    That appears to be what they do. When we were going to purchase, Del-Sur single family homes were from $580k to $640k. Those numbers get you in the door when everything else in RB & Poway are $700k and above. Then you find out that the monthly payments work out to be the same as a $700k house, only that you bought at $600k and the rest is non-deductable taxes. You’re better off getting the $700k house with no melo and low HOA.

    Fortunately those $700k houses are now $600k. When they hith $500k maybe I’ll bite.

  14. thanks for posting on the mello roos/HOA issue, very important to the buying public.

    few things to point out here: the descrepency in SEH’s mello roos comes straight from the price run up between 2002-now. the percentage they charge the mello roos didn’t change, but as the price went up by as much as 150%, so did the mello roos payment. so those buying at the top truly get screwed.

    a little different with 4S. there the older side in 2002 not only had the lower sale price, but the % for mello roos was lower, at 4%. by 2005, not only did the price increase by 150%, but the builders also raised the % mello roos to 6.5%. I think I have seen homes in 4S with mello roos payment of ~$200/month.

    as for del sur, I think a couple of years is about the breaking point for the homeowners there. since the community started in summer of ’06, we should start to see a lot of badness this year from del sur. btw, the U-T has done a lot of coverage of del sur’s community building (currently the community sales office) as one example of "green building", just remember, the each resident will see a jump of $50 per month when that building transfer to the HOA as the HOA is mandated to "buy" that building off the developer. something they didn’t mention on the U-T articles.

  15. You forgot Stonebridge Estates in Scripps. OUCH! They are high!!!!!!!!!!

  16. I was in Del Sur this weekend. Two of the developments were almost sold out. Seller’s "incentives" were extensive. I figure that helps keep the appearance of high sales prices.

    The 2 newer developments look like the were selling relatively well, and the sales offices were actually crowded. If you wanted a home, they’d build you one in 5 months.

    If people are hurting in Del Sur, it isn’t Standard Pacific, Shea, or Davidson, et al.. I’d like to ask JtR:" Are builders better protected during these times?

  17. No worries on the HOA and Mello-Roos, this just in from NAR:

    "Lawrence Yun, chief economist for the Realtors, said he believed the housing market may be on the verge of bottoming out with a rebound expected to start toward the end of this year."

    I am going to run out and buy one of these overpriced places in CV today!!!!

  18. When do you start to lose credibility? After the 11th time in two years that a NAR economist predicts the bottom? Or is it 12 times? Do they think they are doing themselves a favor? By acting this way all they are accomplishing is to gain the label of "dirty used car salesman".

  19. Our maximum was $100 HOA (allowing for the possiblity that it can go up), unless a higher HOA was paying for something truly spectacular, like a community waterfront

    As for Mello-Roos. None. Zero, zip, nada. Because Mello-Roos is not limited by either Prop 13 or the need for homeowner approval, and is potentially non-deductible as a tax. Mello-Roos on a listing was for us an instant poison pill. We didn’t even want to see the photos.

  20. >"Lawrence Yun, chief economist for the Realtors, said >he believed the housing market may be on the verge of >bottoming out with a rebound expected to start toward >the end of this year."

    Yea. Later this year the RE market will turn around. That will create jobs. That will bring the economy back around. That will prevent further houses from foreclosure. The new President will be impressed with the great job Bush did and use all the surplus money to pay for the war, pay off the debt and with the $ left over they’ll rebuild New Orleans.

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