The Greater Fools: Homeowners in HOA Communities

According to word on the streets, living in an Homeowners Association governed community makes your property value higher [than those other people’s homes that are not HOA governed]. How do you know this is true? Because everyone told you so and everyone continues to tell you so. But also, if you do an internet search for, “Do homes in HOA communities have a higher property values?”, at least the first page of your search will tell you, “Yes, yes, of course!”

If you look at most of those search results, you will find something interesting about the groups who are providing the standard answers to the question posed in the previous paragraph. I will let you as the reader try and see if you can figure it out. When I did the search myself, I dug into the articles and forums to see what the people said. And this was how I was introduced to The Greater Fool Theory. So, let me paint this picture:

Let’s say I told you that if you moved into this HOA governed community called Misty Qualms, your home would have a higher value than if you moved down the street into another group of homes with no HOA. You believe me because I am trying to sell you this house. This house in Misty Qualms is brand new—everythang’s included (You can just move right in and start living!). A clubhouse with a pool and gym will be built. And there will be a playground and miles of walking trails. The lawns are going to be maintained and the neighborhood is going to look better than those other people’s neighborhoods down/up the street. Plus, you are going to get away from those people around the corner/on the east/west side. And you will be safe.

Ok now, so it’s going to cost you a little more to live here in order to distinguish yourself from where you came from where those other people live. No big deal! This house in Misty Qualms is priced about 4% higher than comparable homes. You have the money, right! I mean, we will offer you a deal of all deals to get you in! Oh, and to get your lawns serviced each week (or every other week) will cost you $50 per month this year (this will slowly creep up and in 10 years it will double). Oh, and the clubhouse will cost you another $50 per month this year (but it will eventually become a part of a property taxes so you will have to figure out if it doubled or tripled in 10 years. Also you will have to ID everyone in your home who wishes to use these amenities.). You will eventually pay for safety through your HOA because those people are going to come into your neighborhood and try to ruin things.

As a side note though, I just want to add that if you want to do things/make changes to your house, you will have to ask the HOA for permission. And if you do things that the HOA doesn’t like—which may or may not include things in the CC&Rs, your HOA will threaten you, fine you, put a lien on “your house,” and/or foreclose on “your house.” The HOA is not required to do any of this, so I am just letting you know about the possibility. But Misty Qualms will be the best place to live because of this, not in spite of this. And that is how your property value will be higher than those others.

Within three years of moving into Misty Qualms:

Six years later: