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|
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!