The Difference Between a House and a Condo
By definition, a house is a detached building or structure that serves as a living space for an individual or more persons, usually a single family. A free-standing house is not connected to any other structure.
Condo typically refers to an individual unit within a larger property complex, that may consist of multiple units or an entire community. Condos are similar in structure to apartment buildings and the common areas of the building are shared by all of its residents.
Consider Before You Buy
When purchasing a home, buyers often focus on certain aspects of the purchase, such as how much they need for a down payment, mortgage rates and whether it’s a buyer’s or seller’s market. Other practical considerations are location, the number of rooms, purchase price and age of the property.
As a prospective homeowner, it’s also important to think about the type of home before you begin your hunting expedition. Should you look for a house or a condo? If you buy a house, you also purchase the land that the house sits on. If you purchase a condo, you only own the living space inside the unit and a portion of the common areas in the building.
Comparing the Differences: Buying a House vs. a Condo
Before you begin shopping for single-family properties or multi-family buildings and comparing mortgage options, consider the following factors.
More and more, young professionals tend to prefer the active lifestyle that cities and urban areas offer. But the pandemic changed everything. Many of the places that previously attracted buyers to urban condo living are now closed or operating at limited capacities, such as theaters, bars and even public transportation. Stay in the know with our expert-backed financial advice. From banking to investing to retirement, our newsletter has you covered.
Additionally, buyers who would have previously opted to buy a condo in the city for a short commute to work may now prefer a house in suburbia since they no longer need to be near business industry hubs.
As you begin searching for your next home, think about what’s more important to you — is it the convenience of urban living or the spaciousness of a sparsely populated neighborhood?
A huge lifestyle advantage that comes with buying a house versus a condo is that you don’t need permission from anyone to renovate or remodel your home. If you are the type of homeowner who prefers to have total control of your living space, then purchasing a house might be your preference. Unless a homeowners association administers the rules and regulations in your community, purchasing a house entails that you can do what you want to the entire property.
Maintenance Fees and Amenities
Many condo complexes offer amenities such as fitness centers, swimming pools, landscaping services, pet parks, tennis courts, golf courses, jogging trails and security, giving the complex a resort-like feel. Your condo HOA fees usually pay for these amenities in addition to regular building and exterior maintenance.
Single-family homeowners can also expect to pay HOA fees for similar amenities, particularly if they buy in a newer community development. Whether you purchase a house or a condo, be aware of these inconveniences when HOA fees are involved:
Good To Know: HOA Fees
- HOA fees are paid in addition to your monthly mortgage payment, either annually, quarterly or monthly.
- HOA fees can be expensive and can increase together with higher maintenance costs.
- Community decisions are made by the HOA board that represents the homeowners’ interests. You may or may not agree with some, all or any of those decisions.
- In addition to HOA fees, there may be associated property rules and regulations that cramp your style. Again, the lifestyle consideration.
As a single-family homeowner with no HOA, you could have the responsibility of maintaining your property yourself, including the inside and outside of your house. If your home has a yard, you’ll need to consider upkeep of that as well. You may need to purchase–or borrow–tools or equipment to keep the lawn and trees trimmed, or keep pests away.
Price vs. Value
Based on data from the U.S. Census Bureau, condo prices in urban markets rose 15% over the last three months. This rise was slightly higher than house prices in suburban areas and could be attributed to the lure of city living mentioned earlier in the “Location” section of this article .
The value of a home is determined by the price a buyer is willing to pay over time. Home prices and values can greatly increase in a “hot” market. Conversely, when the market is “cold,” home prices and values decrease.
Single-family homes are selling “hot” right now in the U.S. with a 23% increase during the last year. However, condo sales are increasing at a higher rate of 28.8%. Single-family homes also tend to appreciate faster than condos located within the same vicinity.
According to a report by chief economist Lawrence Yun at the National Association of Realtors, buyers preferred single-family homes over condos in 2020, but luxury condos are making a comeback. Again, lifestyle plays a big part in the decision to buy a house vs. a condo.
If you are looking to improve your home’s equitable value long-term, then perhaps buying a house is your best bet. Often, upgrades and home improvements can make a big difference in a home’s selling price.
What happens when you’re ready to move and want to sell your house or condo? Well, condos are often harder to sell than single-family homes. First-time home buyers, investors and older people tend to be more attracted to purchasing condos. So, it may be easier to sell a detached house because of the broader demographics of prospective buyers.
If you have a large family, you might find it more comfortable to purchase a house rather than a condo. Single-family homes tend to have more interior space, and you might find a property with a nice large yard where children can play. A house with a yard is especially appealing if you have a pet.
Contrary to condos, houses tend to have more living space and larger storage areas such as basements, attics and closets. Also, condos may not provide as much privacy as a house because neighbors can be separated from you by no more than a wall on either side.
If you are currently a renter, you might discover that you could not afford to buy the house you are renting. Mortgage payments on houses are typically higher than on condos. Also, utility bills generally run higher in houses because houses often have more square footage than condos.
If you’re on a tight budget and are leaning toward purchasing a house, investigate the actual cost of upkeep. Maintaining a single-family home usually runs annually about 1% of the home’s value or purchase price. For example, for a $400,000 home, you should plan to pay about $4,000 or approximately $333 per month for maintenance.
Lenders typically allow borrowers to take out larger loan amounts for houses than condos. This is true because sometimes lenders factor in HOA dues for a condo when calculating the monthly mortgage payment. In other cases, lenders require a larger down payment for a high-rise condo. Be sure to check with your lender about your buying power for each scenario and purchase type.
A Quick Comparison
Here’s a comparison that summarizes some of the typical advantages and disadvantages to buying a house vs. a condo in the U.S. Note that there may be some exceptions, depending on the city you choose.
|Increase in resale value faster||Have better returns on the rental market|
|Have better investment growth||Typically have higher HOA fees|
|More freedom for homeowner to renovate the property||Tend to have slower appreciation value|
|More privacy and land|