Condo or Single-family home?


With single-family home prices so high, you may be thinking of buying a condo or townhouse.  Or perhaps you’d like to downsize.  Condo living has its pros and cons.  I may be uniquely qualified to discuss them, since I live in a townhouse, sell them (as well as single-family homes) and used to manage homeowner’s associations.

 Before we start, what’s the difference between a condo and a townhouse?  Legally there’s no difference—“condominium” is a form of ownership established by the State of California in 1963 through the Davis-Sterling Act.  I recommend carefully reviewing this document in case you ever have trouble sleeping.

 But there is a difference between condo and townhouse in real estate jargon.  The generally accepted definition of condo is any unit that’s above or below another.  Townhouse, on the other hand, is any unit with no unit above or below.  Either condo or townhouse may be one or more stories.

 Now to the pros and cons of condo living.    

 Pro:  You get more house and more neighborhood for the money.  In this area the value is in the land—in many cases, the house is almost a freebie.  But when you buy a townhouse you’re paying for airspace, not land, and air is far cheaper than dirt.  The typical condo or townhouse is more modern because it’s usually twenty-to-thirty years newer than the typical single-family home in this area.  A townhouse from the 1980s may well offer the 2.5 baths, high ceilings and other accoutrements of modern living you’ve come to expect, yet sell for the same price as a house only a minimalist could have loved even when it was new back in 1950.

 Con:  You’re placing yourself under another layer of government, one with rules that remove some of the homeowner rights most people take for granted.  For example, you can’t modify the exterior of your home without the approval of the Homeowner’s Association.  You won’t be able to park six cars in front of your unit.  There’s a very good reason for these extra restrictions:  most people aren’t used to living this close to each other or to sharing common facilities, and they need guidance.  They don’t want it, and they don’t always take it, but they need it.

 Pro:  Someone else does much of, or perhaps all, the exterior maintenance.  This is great if you’re focused more on work or fun than on cleaning gutters.  How much maintenance the association does depends on their CC&Rs (Conditions, Covenants & Restrictions).  Never assume that they maintain something—always read the maintenance obligations section of the CC&Rs.

 Con:  Someone else does much of, or perhaps all, the exterior maintenance.  Wait, didn’t I just list that as a pro?  Yes, but that “someone else” is an HOA run by a Board of Directors comprised of people just like you:  generally well-meaning but with little or no knowledge of facilities management.  Less common but far more dangerous is the Board member who’s been waiting forty years to be taken seriously, and now that he’s on the Board, by God he expects to be taken seriously.  Somewhere in the middle in terms of impact and frequency of occurrence is the “sidewalk superintendent” who’s convinced himself and everyone else that he’s an expert on everything maintenance-related.  The Board may have the assistance of professional management, but the level of professionalism in “professional management” varies by management company and even within the company.  (I call HOA management a “lightening-rod profession”, with lots of visibility and little authority.)  Homeowners not on the Board may have input in decision-making but won’t have authority to make decisions.  So if the Board thinks the building should be pink with chartreuse trim, it’ll be pink with chartreuse trim.

 Pro that everyone thinks is a con:  You pay homeowner’s dues.  How good is that?  It’s a forced savings plan, a form of dollar-cost averaging.  You’ll have to set aside money anyway to maintain your home.  Some people don’t, of course, but they pay for it when they sell.  Either they get less for their house, or they have to correct years of deferred maintenance in a few weeks.  Playing catch-up on maintenance is expensive for two reasons.  First, repair costs go up every year, making it more expensive to fix something now than it was only a few years ago.  Second, when something like a leaking roof isn’t fixed right away it causes more damage, which costs even more money to fix.  But perhaps the best argument for maintenance dues is that homeowner’s associations can spread their costs over a number of households, so the cost for each unit owner is typically less than it would be for the owner of a single-family home.

 Con:  The close quarters of condo living is a real test of your ability to play well with others.  Some condo-owners think they’re living on forty acres in the middle of nowhere, and no one is going to tell them how to act.  Just hope you don’t live next to one of these rebels without a cause.  And if you do move in with the attitude that no HOA board is going to push you around, consider the condo owners who ended up paying the HOA’s $59,122.50 in legal fees because they insisted on installing “sandtone” colored windows instead of regulation dark brown…and the trail judge made them paint their windows dark brown.

 Myth that comes with an asterisk:  Condos don’t hold their value as well as single-family homes.  I’ve heard this so often that I have no doubt it’s true in most markets.  It’s not necessarily true in this market and when it is, the explanation isn’t quite that simple.  We have such a wide range of housing—from $300k condos to $1.5M townhouses to $600k single-family to $5M estates—that it’s more useful to see the market not in terms of housing types but in terms of price ranges.  Most condos and townhouses fall in the entry-level end of the market, currently anything selling in the low 7s or less, and their rate of appreciation seems to parallel that of single-family homes in that range.  That end of the market has generally seen good appreciation with far less volatility than the top end.  Many of these entry-level markets actually sell for more than they did in Spring 2000, in part because they gained value while the rest of the market tanked in 2001.  The low end benefited least from stock market wealth during the run-up, and suffered far less than some single-family markets (or not at all) when that wealth melted away.  It’s true that high-end townhouses, say from $1M up, have seen more volatility than those further down the price range, although it depends on the development.  I suspect that local condos have done well for at least four reasons.  First, the high cost of single-family homes pushes a big part of the market into condos, and that large pool of potential buyers creates demand that supports prices.  Second, the high cost of land means there’s a real shortage of newer yet affordable single-family homes, so if you’re on a budget but want a home that post-dates the Eisenhower Administration, you’re looking at townhouses.  Third, it’s much harder to overbuild condos here, where the wide open spaces disappeared thirty or forty years ago, than in other areas.  And fourth, the work-hard-play-hard lifestyle common to Silicon Valley doesn’t leave much time for the usual homeowner maintenance chores.

 So buy that condo or townhouse with enthusiasm and a clear conscience.  Just remember:  like everything else in real estate, there will be trade-offs.

 Below I’ve charted average sales prices of the more popular condo markets as of 2012.


Interested in buying a condo or townhouse?  Please contact me at

copyright © John Fyten 2004-2014

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