I just finished taping a TV interview in Denver on the future of Homeowners Associations. The host generally agreed with me that a financial tidal wave is coming that will slam into the nation’s housing market. It will begin with a collapse of the U.S. mortgage industry and HOAs will be the first to be decimated. With the unprecedented amount of federal debt, the ending of quantitative easing, Japan’s weak-kneed attempt to begin its own form of quantitative easing, Russia vowing to outlaw circulation of the U.S. dollar, China’s weakening international trade, a U.S. stock market trading (weakly) at all-time highs, threats of war in Ukraine, Iran, Syria, North Korea, the US/Mexico border, former Communist leaders predicting a return to leadership in East Germany. All the signals for world-wide financial disruption are there.
Outside the TV studio the host asked me a question I had trouble answering: “OK, if you believe all this is coming, where do you put your money?”
Whew! Talk about a million dollar question.
Some experts are advising stashing savings into commodities like silver, copper, any basic manufacturing materials. Others advise using your spare money to pay down mortgages to help you hold out for the long run. Still others say to get ready for hard times you need 9 months of food and water stored in the basement.
I’m not an economist, not even a great investor, and I’m certainly not a survivalist. But if HOAs are the first to be hit in the coming tsunami, why would a homeowner want to pay off a mortgage in an HOA house? With the massive potential for a troubled HOA to bully marginal homeowners with extra fines, fees, liens, legal fees and collection costs isn’t a paid-off HOA home a prime target for greedy (or desperate) board members and managers? Isn’t a supposedly ritzy HOA neighborhood a prime target for questionable slip ‘n’ fall lawsuits where each owner has to fork up money to pay off judgments and legal expenses?
Add to the mix the Nevada court decision (and pending replication elsewhere) the fact that a super-priority lien (the HOA’s petty fine for unmowed grass) can extinguish the first deed of trust (your mortgage) and you’ve got the formula for neighborhood nitroglycerin. It’s unstable at best.
We’re learning more each day about the risks of owning HOA property. Abusive boards, management companies and complicit law firms have brought all this seeming lack of stability about. So, what is the smart investment in troubled times?
I’m all ears.