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I Thought This Would Be The Next Best Thing, But It’s A Black Hole

A report from Boulder Weekly in Colorado. “When Adam Perry got home one afternoon in August, he had a notice on the door from his homeowners’ association (HOA) announcing the roofs around the Iris Hollow condominium complex were in dire need of repair. The notice said, ‘there’s a special assessment coming and it’s going to substantially increase your dues,’ Perry recalls. ‘I completely freaked out.'”

“He bought the place in 2014 through the City of Boulder’s Permanently Affordable (PA) Home Program, and this was the second time he was being hit with a special assessment. The first was in 2017, for the outdoor, uncovered stairs; now the roof. Next, he’d heard, the stucco, and then repaving the parking lot.”

“‘The people who own condos at Iris Hollow who bought in through this program are suffering right now,’ Perry says. ‘It’s not called the permanently affordable mortgage program, it’s called the permanently affordable home ownership program.'”

“One of his neighbors, he says, is simply unable to pay the HOA fees and there is a lien on their home. Another one is trying to sell and get out of the program but is worried they won’t be able to with both the current and upcoming assessments.”

“‘I thought this would be the next best thing, but it’s a black hole,’ PA owner Amy Gahran says. Her current HOA payments almost equal her monthly mortgage. For Perry, it’s more than his mortgage. When he bought the home, he thought he was committing his family (including daughter Sidney, now in the third grade) to an $820 monthly mortgage payment, and monthly HOA fees of $350. Over the years, the fee increased to $420. Then came the assessments.”

“‘My monthly HOA right now is $844, and starting in March, it’s going to be just under $1,200. That’s insane,’ Perry says. ‘I don’t think any reasonable person would call that affordable.'”

“As a matter of comparison, Perry is currently paying a combined monthly payment equal to that of a mortgage on a $480,000 home on the open market.”

“The City does offer HOA education prior to purchasing a home through the program and encourages PA owners to get involved in their HOA budgeting process as part of the board. It also hosts a bi-annual HOA group through the neighborhood liaisons for PA owners to bring concerns and ask experts questions.”

“‘I remember them saying that if anything happens outside of your home, it’s going to be covered by the HOA,’ Perry says of the HOA education he received. ‘It’s not like anybody let us know when we bought there’s probably going to be literally hundreds of thousands of dollars in repairs that need to happen in the next few years.'”

“‘What happens when you buy a quote ‘permanently affordable’ home and then it’s not affordable anymore?’ Perry asks. ‘How can the City just wash their hands of that and say, ‘Well, you bought the place.'”

“‘I’m 52, I was hoping when I bought here, I would be set. And the next thing coming out of my place in a box is me,’ says Gahran, who hopes to sell her unit and move to a new development in Longmont. ‘Frankly, I’m expecting I’m going to have to eat this,’ she says. ‘I just hope I get out in time before more assessments get levied.'”

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  1. ‘As a matter of comparison, Perry is currently paying a combined monthly payment equal to that of a mortgage on a $480,000 home on the open market’

    $480k is chicken feed to a wealthy airbox owner in Boulder. Just refinance and turn that frown upside down.

  4. He got stucco…he really got stucco.

    “… this was the second time he was being hit with a special assessment. The first was in 2017, for the outdoor, uncovered stairs; now the roof. Next, he’d heard, the stucco, and then repaving the parking lot.”

  5. ‘It’s not like anybody let us know when we bought there’s probably going to be literally hundreds of thousands of dollars in repairs that need to happen in the next few years.’”

    Is this place a group home for the developmentally disabled? Given the shoddy construction standards of apartment and condo complexes built during both Housing Bubbles 1.0 and 2.0, anyone with one brain synapse talking to another should’ve been able to figure out such sites were going to be serious money pits as corner-cutting by developers and sub-par work by illegal immigrant cowboy contractor crews started manifesting in huge remediation costs.

    Most “affordable housing” schemes are thinly disguised patronage and graft rackets for local political party machines.

  6. Another day, another massive drop in oil prices…

    Enjoy the affordable gasoline prices this holiday shopping season!

    U.S. oil tumbles nearly 7% as pressure builds on OPEC to cut output
    By Barbara Kollmeyer and Mark DeCambre
    Published: Nov 23, 2018 8:50 a.m. ET
    Oil endures losses through Thanksgiving break

    Crude-oil prices plunged in early Friday trade in New York, with the contract headed for its seventh-straight weekly fall as investors increasingly focused on a coming OPEC meeting.

    January West Texas Intermediate crude (CLF9, -6.50%) slid $3.73, or 6.8% to $50.90 a barrel. The contract rose nearly 2.3% on Wednesday, after losing 6.6% Tuesday to settle at a more than one-year low of $53.43. For the week so far, WTI is down 7.8%.
    …

    1. Do you suppose there’s a linkage between cheap oil and ABQ Dan’s extended absence from the HBB? If he stays gone, does that mean we’ll enjoy permanently affordable gas into perpetuity, just like those schlonged Boulder condo owners thought their shacks were going to be?

      1. He’ll be back the next time oil approaches $80/bbl, crowing about the superior accuracy of his price prediction.

        1. Abdan reads like a malignant narcissist. He has never once admitted he was wrong in his predictions, instead crowing on and on about how accurate he has been.

  7. There’s a small problem with this analysis, which is that it ignores the Fed’s policy stance and particularly the risk free interest rate, which was approximately zero back when the earlier Bitcoin recoveries from deep corrections occurred. Who wants to HODL crypto with zero income and negative capital gains when you can collect a risk free return of three percent on dollars?

    Somehow a drop from near $20,000 a coin down to near $4000 seems more momentous than from $35 to $2, even if not in percentage terms, but I digress.

    Bitcoin Analysis November 23, 2018 12:00
    Not All Gloomy: 79% Drop of Bitcoin is Smallest Major Correction to Date
    Bitcoin mining

    Bitcoin (BTC) has experienced five major corrections to date, and the recent bear market of 2018 is the smallest major correction to date.

    As seen in a table shared by a renowned trader and technical analyst Peter Brandt, BTC experienced a drop of 79.7 percent in the past eleven months as its price declined from $19,500 to $4,035.

    https://www.ccn.com/not-all-gloomy-79-drop-of-bitcoin-is-smallest-major-correction-to-date/

  8. We talked a while back here about the perils of buying property in a place like Chicago with huge looming pension obligations. The Fed Reserve Bank of Chicago had their economists put forth a proposal for a statewide property tax on top of the high property taxes they are already paying. This strikes me as a very likely solution politically.

    Well, what I want to bring up this morning, and what I’ve been thinking about is an article that I read over at City Lab a few days ago about the “dark store” theory. These are municipalities that are fighting big box retailers over property valuations. I don’t have a dog in the fight here as to whether the cities are in the right or the big box retailers are in the right. I tend to come down on the side of the retailers because it is quite likely that internet shopping and the “retail apocalypse” means that the actual value of the properties they are occupying are far less than the appraised value (HBBers generally think housing is far overvalued, including commercial). The point is that this shrinking tax revenue base will likely put more pressure on municipalities to collect revenue in other ways. And the most stable tax of all is property tax on land and homeowners, because they are a captive audience.

      1. No matter who wins, I expect that the heyday of ‘big-box’ retail has already passed. Even the ones that remain are shifting some of their operations to online.

        If states successful fight their attempts, or just raise the property taxers too high, it’ll push the stores operating on too thin a margin into closing. And then how much tax revenue will the local governments get?

        Heck I wouldn’t be surprised if some chains closed stores and then re-opened a small store just over the city limits in an unincorporated area or in another town willing to give them a break.

        Some places like Cook county are going to be hellbent on taxing their residents and business to death to meet all the obligations they took on, and that will wreck them in the long term.

        1. My thoughts exactly. With drone deliveries, electrified transport, and self-driving there is really no reason why the actual purchase of a thing has to be in the physical location of its residents. Tax arbitrage may be so appealing to run a showroom model and then have the purchase take place online. As budgets get tighter, I fully expect that this will play out in an ugly way.

          1. drone deliveries, electrified transport, and self-driving

            We may not get all that more complex, more expensive stuff when the Great Credit Expansion ends. We may get simpler and less expensive, which used to work just fine.

            Amazon free delivery may be crushing local stores, but it won’t last because it’s not profitable.

          2. Even if ‘free delivery’ gets more expensive (it’s part of Amazon Prime, isn’t it?) a lot of customers will not stop.

            Amazon is first and foremost a logistics company, and they have nailed that mission to a level I would never have believed back when they were selling only Music and Books.

            Now, the convenience – less time spent shopping, no time spent in the car driving somewhere, and the nearly infinite selection – not to mention the gas money saved and time, will keep it desirable even if shipping costs go up.

            Where I don’t see Amazon making much more headway is in groceries, and random basics. Target, Walmart and grocery chains should survive, but everyone else in retail is at risk.

  10. I’ve never had a problem with the concept of an HOA as far as setting rules for the neighborhood to live by. (No trash in the yards, no loud parties after 9pm, etc) but when you bring these old people in for a money making scheme it’s just a recipe for disaster. The last condo I lived in had an $80,000 assessment for new mailboxes, even though the old ones were fine. They wanted to bring in lockers for packages so they wouldn’t get stolen, even though that has never been a problem on the past. New mailboxes went up, package lockers never came and when my landlord asked for a refund she was laughed at by the seniors on the HOA board.

    “Well, where did the package locker money go”? No one on the board had an answer for that.

    2. ““Well, where did the package locker money go”? No one on the board had an answer for that.”

      While I’d never buy a condo, I’d be their worst nightmare in such a scenario. I would personally go door to door to every unit with the exception of the HOA board members and organize not only an ouster of the board members, but an investigation and lawsuit, possibly leading to criminal charges. “Homey don’t play that.”

      1. While I’d never buy a condo, I’d be their worst nightmare in such a scenario. I would personally go door to door to every unit with the exception of the HOA board members and organize not only an ouster of the board members, but an investigation and lawsuit, possibly leading to criminal charges. “Homey don’t play that.”

        So this reminds me of my personal experience from my previously owned air box /HOA bound shack. They had a board member hire her lawyer “friend” to rewrite the bi-laws or whatever they called the rules, and after spending 80k nothing was produced as no one would agree on the new documentation. One of the condo owners persued litigation and a few months later the monthly dues went up almost 50%. After 5 years of living there and my kids getting to ages where that environment was not ideal for them, I put the shack on the market and vowed never to get into an HOA bound property again. It would be ideal for someone who wants to pay the price to say they own the shack but feel like a renter with rules and a board of people dictating what they can and can’t do. Renting in such an environment sure seems a better way to go

  11. ” he had a notice on the door from his homeowners’ association (HOA) ”

    I am of the opinion that one should never have a “notice on the door from his (or her) homeowners’ association (HOA) ” because I am of the opinion that one should never buy a place to live that has a “homeowners’ association” in the first place.

    1. Citizen! You are perilously close to endangering your social credit score by rejecting attempts to control and monitor you.

  12. I fully sympathize with the owner. For folks not savy to the ways of associations, the is all to common. Handing the buyer the association docs is generally not a detailed process in closings other than the buyer signing the declaration that they have been provided docs and that they understand.

    One could argue that the buyer should know what they are getting into, but frequently they they do not and no one is ready to inject a negative when it could jeopardize a sale. I have reviewed my share and associations are not for me. You are signing over control when you enter into these places and not much you can do about it. OK if you thoroughly understand how deep that rabbit hole can go and are prepared.

    Sad.

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