Condominium market moving up compared with single-family homes based on prices, attractions
By Jim Parker
They’re a value-priced alternative to single-family homes, offering accouterments such as upscale kitchens, master suites and scenic views while giving up the benefit of a yard. Most are geared to singles, couples or parents of one or two youngsters rather than a growing family.
Condominiums – and their two- or three-story sister designs known as townhomes – are most common in metro areas but sprout up in more limited numbers in towns and rural areas. The properties, located from ground to upper floors in multi-level buildings, are gradually sparking interest in a pricey real estate market low on inventory in which buyers look for varied types of residences. The one-story condos also can double as investments either with owners renting them out or selling at a later date at a profit.
According to the National Association of Realtors’ latest report, condominium and co-op – condo-like properties operated by a group of owners – sales rose by a moderate 1.7 percent in October from a month earlier, to a seasonably adjusted 610,000 units. All the gains were in the South region, which has more than 40 percent of the condo total.
Regions also include the Northeast, Midwest and West. Sales from a year earlier were unchanged nationwide and in the four tracked regions.
Separately, condo prices climbed 6.9 percent from a year ago to $236,800 in October. The West, which had the most expensive sales price in October at $361,800, saw the steepest year-to-year increase at 11.1 percent. The lowest price is in the Midwest, at $172,900, while the South had the scarcest price increase at 2.7 percent to $181,700.
Condos remain a tiny slice of the housing market; single-family home sales in October by comparison reached 5,480,000 – close to 10 times the condominium volume.
The tidy units, typically managed by homeowners groups or professional property managers, are considered in some cases as an affordable housing source. According to the NAR, which bills itself as America’s largest trade association with 1.3 million members, “the national median condo/co-op price often is higher than the median single-family home price because condos are concentrated in higher-cost housing markets. However, in a given area, single-family homes typically sell for more than condos.”
Real estate observers tend to concur that condos and single-family homes both sport pros and cons and that the final decision is based on the buyer’s choices for amount of room desired, interior perks, land and price.
“While you’re considering a host of factors – the size of your family, your lifestyle, how much you love or hate yard work – you should also look at the varying costs that come with buying and maintaining single-family homes versus condos,” says Dan Rafter, writing for Quicken Loans. “These costs might help sway you toward one property type or the other,” he says on the company’s website in July.
Rafter cites five expenses to look at: purchase price, homeowner’s association fees and assessments, maintenance, homeowners insurance and property taxes.
Median condo prices were actually $10,000 less as of April than single-family homes, the Realtors association points out.
However, with HOA fees, also known as regime fees for condos that can cover lawn care to garbage pickup, “you can expect to pay between $200 and $400 every month,” Rafter says.
Sometimes, condos charge a special assessment, say for building repairs, which can outstrip the complex’s reserve fund and require additional money each month for owners.
Maintenance costs can add up, although not as high as the 2-4 percent of house value that single-family homeowners should save, Realtor.com says. Condo maintenance expenses can include a new dishwasher or air conditioning unit.
Condo buildings will have their own insurance policies, paid from the HOA fees. “But you’ll also have to take out a homeowners insurance policy for your individual condo unit, which will protect you if your own unit is damaged or items from it are stolen,” Rafter says.
Trusted Choice, a group made up of independent insurance agents, says you can expect to pay from $100 to $400 a year for condo insurance, he notes.
Property taxes would be the same as for a single-family home of the same value, say $200,000. “But condo owners might face a big tax increase if the condo’s developer was granted a tax break that’s scheduled to end,” Rafter says.
Steve Gillman, a consumer-style writer, notes on the Penny Hoarder website that he and his wife “have owned and lived in seven houses and two condos in 15 years, and there were pros and cons at each.”
His condo favorites include:
* Typically lower costs. Among randomly chosen cities nationwide, Madison, Wisconsin, has a median home price of $254,700 and condo median of $173,800; Reno, Nevada, is $314,400 for a home versus a $169,500 condo; and Atlanta goes from a $191,500 home to $168,800 for a condo.
* Lower monthly expenses.
* Easier to take care of.
* Amenities such as a pool or kids playground are often included.
* Often better locations such as parks, grocery stores and restaurants nearby.
Condo disadvantages, he says, include extra rules and restrictions, less storage space, no yard, less privacy, higher association fees or special assessments and a higher mortgage rate from a condo add-on charge.
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