A Fine Line

Last week I was showing some property to a young couple who expressed an interest to me in buying a house in this area. What we had been looking at was primarily smaller single family homes in a price range up to about $775,000. These homes are mostly 3 bedroom, 1 bath or 2 bedroom, 1 bath homes and they all average about 1350 square feet. Some remodeled, some not, depending on the neighborhood.

On one of our exploratory appointments I suggested that we change the pace a little bit an look at a townhouse that I had seen…just for comparison sake. We drove over to a very nice 3 bedroom, 2.5 bath, 2031 sq ft place that’s all remodeled and has an absolutely breathtaking view of the bay, the Peninsula and San Francisco beyond. On top of all that, the place is priced under $750,000. These folks spent a lot of time there and really expressed some serious intent about the place too. They asked for the disclosures and studied them in earnest and sincerely considered making this place their home…instead of the single family houses that we had seen.

At the end of the day they decided against this place. Why, you ask? Because this particular project has association dues that are currently $450.00 a month. They told me that they were “worried” that these dues are certainly not etched in stone, that they could always go up and that they concluded that $450 to $500 a month was the equivalent of between $90-95,000 on a traditional mortgage at 4.75%. Ultimately they didn’t think it was wise to spend that kind of money on dues that are not tax deductible either when they could buy a pricier house, have a deduction on that mortgage interest and still have a private back yard.

Kind of hard to argue with that, isn’t it? OK, the townhouse is terrific. It’s a nice residence and I’m sure my buyers would love living there…but those high dues hurt that sale. When I look at Foster City’s condo/townhouse inventory I see much the same story. I’ve probably beat this subject to death actually, but I just can’t get over the fact that Foster City’s dues overall are exceedingly high. It’s no coincidence to me that 3/4 of the pending sales on condos/townhouses in Foster City right now have dues under $350.00 a month. It also shocks me to see that the two pending sales at Promontory Point are on units priced at $678,000 and $640,000. Both of these reflect price declines in that project of over 30% from their high. Nobody else at any project in the Mid Peninsula has had a reduction of anywhere near that in the last few years. It’s not a coincidence that their dues are $772.00 a month.

Of course, Promontory Point is an extreme example. The concept is clear however. Buyers can, and are quite willing to choose a smaller house right now over a townhouse or condo just because of their high dues. Their threat to escalate, have as well, created enough fear that the market for these homes have slowed while houses have remained stable or have grown.


  1. Dana Ferri says:

    I’d have to agree that choosing to live in an HOA is a gamble. We are horrified at how quickly our dues have increased over the past few years. I’m pretty sure I know the young couple you are talking about, and I think they have heard our stories of other problems with HOAs too. I am rooting for them to choose a single-family house. Wish we had that over the townhouse we own.

  2. Jim, well said about condos/Townhouses HOA dues. This definitely turns off the new buyers. Existing homeowners like to increase the dues, as it does not affect them much – as they dont fork huge mortgage payments like the new home buyer would have to do.

    Good job on the writeup.

  3. Good for the young couple in considering the total cost of ownership and factor in how much the HOA is equivalent to about $90K in house price. That’s how financial decisions should be made. I wish more mortgage brokers, financial planners and real estate agents can educate their clients that way.

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