The dream of homeownership is deeply ingrained in American culture. For many, owning a home represents independence, wealth building, and a stable environment to raise a family. But today’s sky-high home prices in many markets are forcing more buyers to consider condominiums instead of traditional single-family homes. While condos offer lower prices and shared amenities, they also come with major drawbacks for the average homebuyer. When it comes to achieving the ultimate dream of homeownership, stand-alone houses reign supreme over condominiums for a multitude of reasons.
The Pros of Single-Family Homes
- Privacy and Freedom : One of the biggest advantages of owning a freestanding home rather than a condo is privacy and personal freedom. With a whole house and private yard to yourself, you can truly do as you please. You can play music loud, have friends and family visit whenever you want, and not worry about neighbors above, below, and on all sides. Condo living brings inevitable constraints through noise rules, guest policies, and sharing common walls and spaces. For those who value independence and flexibility, houses provide an unmatched oasis.
- Yard Space and Other Amenities: Along with privacy comes the perks of a private yard when owning a single-family residence. Having your own outdoor space allows activities like gardening, swimming, building an addition, or enjoying seclusion. While condos may offer shared community amenities like pools or gyms, these conveniences can’t compete with the personal joys and privileges of owning your own slice of outdoor space.
- Making Renovations and Improvements: When you own a house, you have the freedom to remodel, renovate, and make custom improvements as you see fit. Whether it’s remodeling a kitchen, finishing a basement, or painting rooms any color you like, a homeowner has few limits on personalizing their dwelling. Condo owners must abide by association rules regarding approved modifications, which significantly restricts renovations.
- Building Home Equity: One of the biggest financial advantages of owning a house versus renting or buying a condo is building home equity. As you pay down your mortgage, you gain an increasing ownership stake in your home. With condos, your equity is limited due to the shared nature of the building and land. What’s more, as buildings age, the cost of ownership increases, while the value of each condominium unit decreases. In contrast, houses offer the most potential to create wealth as the full property value and underlying land appreciates.
- Stronger Investment: Speaking of appreciation, stand-alone homes also benefit from better long-term property value increases compared to condos. This makes buying a house a wiser investment as it will likely gain value at a faster rate over time. According to real estate company Redfin, condos appreciated 10.4% in 2021 versus 17.6% for single-family homes. This gap adds up substantially over years of ownership.
- More Financing Options: When purchasing a house, buyers enjoy more flexible mortgage options compared to condos. Government-backed loans like FHA and VA mortgages can only be used to buy single-family homes and not condominiums in many cases. Jumbo loans also favor houses in terms of maximum loan amounts available. Overall, purchasing a home provides purchasers access to the best rates and terms.
- Control of the Homeowners Association: Condo owners must participate in a homeowners association (HOA) with shared management, costs, and authority over residents. With a house, you don’t have an HOA and the hassles that may come with one. The trade-off is you are solely responsible for all exterior maintenance. But for many, this autonomy is preferable to HOA rules, limitations, and fights with the community.
- Long-Term Stability:Â Over the very long run, single-family homes provide greater housing stability versus condos. Unless earthquake or sinkholes threaten, your house will likely last for generations if maintained properly. Condo buildings eventually fall out of favor and require major rehabilitations. While houses require care and upgrades too, their basic structure remains sound decade after decade.
The Cons of Condos
- Association Dysfunction: One of the biggest headaches of owning a condominium is the condo association. These groups, run by residents, often suffer from infighting, power struggles, and poor management. Dysfunctional associations fail to maintain common elements properly or build adequate reserves. Some even go bankrupt, requiring costly special assessments on all owners.
- Expensive HOA Fees: In addition to your monthly mortgage, condo owners have to pay homeowners association (HOA) fees which can really add up. These fees, often $200 to $700 per month, pay for shared amenities and upkeep. And HOA fees tend to increase steadily over time. This eats into affordability and cash flow.
- Board and Neighbor Conflicts: Life in a condo complex entails endless opportunities for conflict with the condo board and your neighbors. Pet policies, noise issues, parking, and use of common areas can all become sources of strife and frustration. Those wanting to avoid such headaches are better off in a single-family home.
- Special Assessments: When a condo building needs a very expensive repair like a new roof, owners can get hit with crushing special assessments. These one-time fees, often thousands of dollars, are mandatory for all owners. New buyers are especially vulnerable to unexpected special assessments soon after purchasing.
- Risk of Developer Lawsuits: In Florida, condo owners are facing a crisis due to rampant construction defects in buildings. Faulty materials and workmanship have led to devastating structural failures. As a result, condo associations are suing developers over these defects. But if the developer goes bankrupt, owners may be left holding the bag.
- Questionable Financing: Due to the risks and costs mentioned above, getting a mortgage to buy a condo is more challenging than financing a house. Many condo buildings fail to qualify for FHA loans due to restrictions. Jumbo loans also have lower maximum amounts for condos. This forces buyers into less advantageous financing options.
- Less Future Flexibility: Over time, the needs and circumstances of homeowners invariably change. Houses offer the flexibility to easily expand or reconfigure living space accordingly. Condos lack this versatility for altering layouts or adding new rooms. What you buy is likely what you’re forever stuck with in a condo.
- Stricter Rules and Limitations: From pets and parking to parties and renovations, condo living comes with abundant rules and limitations enforced by the condo association. Want to repaint your unit pink and purple? Chances are you can’t. Wish to rent out your unit occasionally? Not likely permitted. For free-spirited owners, the constraints of condos chafe heavily.
- Development Decline Risk: If several condo owners fall behind on HOA payments, the entire building’s finances suffer. Lack of maintenance funds can start a downward spiral where the condo becomes run down and unattractive. This depresses values community-wide, impacting all owners negatively. Houses don’t share this risk.
- Limited Appreciation Potential: Due to the factors above like high HOA fees and special assessments, condos simply don’t gain value like single-family homes over time. One study showed houses out-appreciated condos by 36 percent over a 30-year span. For buyers wanting their property investment to pay off, houses are the far better option.
When Condos Do Make Sense
The drawbacks of condos are significant for most average homebuyers who should prioritize houses. However, condominiums may be a rational choice in certain situations:
- For single buyers who value amenities and don’t need much space.
- As seasonal vacation properties or pied-a-terres for business travelers.
- In very high-cost markets where condos are the lone affordable option.
- For wealthy buyers who can afford luxury condos with high monthly costs.
- As rental properties to generate income rather than build home equity.
The Bottom Line
Ideally, every homebuyer would be able to purchase a single-family home that meets their needs and lifestyle goals. However, skyrocketing home values are putting traditional stand-alone houses out of reach for more Americans, especially in desirable job markets. For moderate income buyers, condos may feel like the only viable path to ownership. But that path contains plenty of rocks and pitfalls.
Unless you have excess money to absorb exorbitant HOA fees, special assessments, and major repair costs down the road, think twice before buying a condo. The smarter move both financially and mentally is to keep renting moderately priced condos. Save your cash for that dream house with a private yard one day. Condos are a poor substitute for the joys and wealth-building potential of owning your own slice of the American dream.