How has the current economy affected homeowners association assessment collections in Arizona?

How Is Inflation Affecting HOA Dues?

The homeowners association rates are constantly changing, they are not a fixed rate. Lately, inflation has been affecting these rates and inflation is the reason behind these jumping rates. before we can understand how inflation affects HOA dues, let’s look at how associations determine these fees. Every homeowners association has board members, they are responsible for preparing the budget. This budget is all of the upcoming year’s expenses. The board then divides the total cost of anticipated expenses among the community and themselves.

The Impact of Inflation on HOA Reserves

Inflation affects the HOA’s finances in more than just one way, aside from the HOA dues, inflation can impact the HOA’s reserve fund. Most HOAs will collect reserve contributions from members, usually the contributions are included in end-of-the-year calculated dues. These HOA reserves are very important, because they act as an emergency fund for things like building a new playground or making a major repair to the property. Board members have a reserve study that essentially tells them how much money they need to set aside each year to keep at a healthy level.

Other Factors That Cause Rising HOA Dues

Here are some important factors that will directly affect HOA fees and dues.

Rising wages: When labor increases, vendors have to pay their employees. It is the same for the HOA, they have to employ their own in-house workers and this can lead to a high cost of services, eventually leading to dues rising in price.

High Delinquency Rates: If an HOA has a high number of delinquent owners, it will have a harder time reaching its optimal budget. As such, many boards overshoot dues calculations or levy special assessments to cover these delinquencies. This can add a lot of issues when dealing with HOA management.

Additional Amenities or Services: A homeowners association that wants to add more amenities or services for the community will likely need to increase its dues.

Arizona Housing Market: What is happening in 2023?

The Arizona housing market was doing very well during the pandemic, especially in Phoenix the State’s capital, which saw median home prices drastically increase for two years until they peaked at around 480,000$ in May 2022 which is a 61% increase.

The median sales price in Arizona was $350,390 for all housing types in May 2023—down 3.2% from a year ago, according to the Arizona Association of Realtors.

Real estate brokerage firm Redfin reports that the median sales price for all home types in Arizona was $436,100 in May 2023, a 6.2% decline from the previous year. Despite the difference in reports, both show a trend of Arizona home prices stabilizing.

These numbers vary depending on the county you are located in.

actual list prices vary depending on the region of the state. As of May 2023, the National Association of Realtors noted the following median list prices and the year-over-year change in these Arizona counties:

County Median List Price Year-Over-Year
Coconino $758,750 3.9%
Yavapai $643,375 -1%
Maricopa $560,725 -2.3%
Gila $515,000 3.2%
Navajo $491,342 1.7%
Mohave $424,925 4.0%
Apache $417,500 7.3%
Pima $414,350 1.8%
Pinal $407,500 -9.4%
Cochise $329,000 15.5%
Yuma $325,000 4.9%

What factors affect the homeowners association?

Economic Conditions:

Economic factors, such as local employment rates, inflation, and housing market trends, can influence homeowners’ ability to pay assessments and impact the overall financial health of the HOA.
Property Values:

Changes in property values within the community can affect the HOA’s budget, as assessments are often based on property values. Economic conditions, development projects, and market demand can all influence property values.
Legal and Regulatory Environment:

Local and state laws, as well as any changes in regulations, can impact the governance structure and operational policies of HOAs. Compliance with legal requirements is crucial for the association’s stability.
Community Size and Structure:

The size and structure of the community, including the number and type of properties, can influence the complexity of managing the HOA. Larger communities may have more extensive amenities and infrastructure to maintain.
Community Amenities and Infrastructure:

The presence and maintenance of amenities (e.g., parks, pools, common areas) and shared infrastructure (e.g., roads, utilities) can significantly impact the budget and ongoing expenses of the HOA.
Community Engagement and Communication:

Effective communication between the HOA board and homeowners is crucial for community cohesion. Lack of communication or disputes can affect the overall atmosphere within the community.
Enforcement of Covenants, Conditions, and Restrictions (CC&Rs):

The degree to which the HOA enforces its CC&Rs can impact the overall appearance and character of the community. Consistent enforcement helps maintain property values and community standards.
Management and Leadership:

The effectiveness of the HOA board and the professionalism of any management company hired by the association can influence how well the community is managed and how smoothly operations run.
Insurance and Risk Management:

Adequate insurance coverage and risk management strategies are essential to protect the HOA from unexpected events such as natural disasters, accidents, or legal issues.
Reserve Funds:

The presence of a well-funded reserve account is critical for addressing major repairs and capital improvements. A lack of reserves can lead to special assessments or deferred maintenance.
Technology and Administrative Tools:

The use of technology and efficient administrative tools can streamline communication, financial management, and community engagement, enhancing the overall effectiveness of the HOA.

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