If you’re trying to help buyers thread the needle between affordability and prime location, a condominium or townhome may be high on your list of options. But which one offers the better home value growth potential? The answer depends on where you’re looking, according to research from Realtor.com.
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Hannah Jones
Realtor.com Senior Economic Research Analyst Hannah Jones writes that, over the past decade, condo and townhome appreciation in the broader market has developed “almost in lockstep,” but townhomes have recently pulled ahead for buyers looking for a living option that’s similar to single-family homes without the single-family price tag.
“Townhomes are commanding a growing premium as buyers seek a house-like property when single-family homes are out of reach. In more affordable markets, condos — often concentrated in dense city centers — have captured stronger growth as buyers compete for limited housing options,” Jones said in Realtor.com’s report.
However, when breaking down condo vs. townhome values by region and micromarket, larger differences become evident.
In more affordable Midwest and Southern markets, condo price growth has outpaced that of townhomes over the past decade, with Midwest condo prices up 78.3 percent and Southern condos up 66.7 percent, compared to 70.7 percent and 53.1 percent respectively.
Alternatively, in the higher-cost Northeast and West, townhome values are up 80.5 percent and 83.8 percent respectively, compared to the only 58.6 percent and 78.9 percent gains for condos.
Aside from regional differences, condo values are favored in robust downtown areas, while townhomes appeal more in sprawling metropolitan markets, where buyers are looking for a more “house-like” property experience, but supply constraints put single-family homes out of reach.
Condo vs. townhome differentiators
One of the benefits townhome owners enjoy is ownership of both the structure and the land it sits on. In addition, because townhomes’ HOA fees are generally lower than condo fees, buyers may be able to get more bang for their homebuying budget.
“When looking at the two as investments side by side over 10 years, the appreciation could be similar, but paying an extra $300 to $500 a month [in fees] is a sunk cost of $36,000 to $60,000 that didn’t go toward your mortgage principal,” broker Joe Luciano, of RE/MAX Bentley’s, said in the Realtor.com’s report.
On the other hand, lifestyle amenities can make condos a more attractive proposition for some buyers, offering a powerful differentiator in downtown or resort markets. In-house concierge services plus wellness and fitness perks appeal to luxury and second-home buyers, who may be primarily focused on convenience.
Looking at long-term value, Realtor.com’s analysis argues that both condos and townhomes can offer strong returns, “just not always for the same reasons, or in the same places.”
Assuming a lack of significant zoning reform and single-family home development over the next decade, the report argues, both condos and townhomes are poised to see ongoing increases in demand. Tax incentives, safety concerns and reserve requirements will determine which type of housing comes out on top in terms of demand and subsequent appreciation.
