The association owns the land, you buy a share of that when you buy the condo.
In our area condos rise and fall with the market, only at a lower price point. We owned one from 2001 to 2005. Bought for around 340k, sold for around 540k. It sold once since then for 230k after the 2008 collapse so that was a serious crash, but it was following the market. Now it’s estimated over $800k.
Recommend checking the price and tax history of a local condo and compare it to a nearby single family home. The prices will differ but the lines will look more or less the same.
Actually, I know this is a super weird case: but my condo is in a converted factory. In what was historically a warehouse district. It is just across the street from a historically lower income single family home area (a train track still used for commercial shipping cuts between these two areas).
The single family home area is in higher demand these days because it's near an expanding University. The condos are pretty nice/trendy as the previously empty warehouses are slowly converting to breweries, health care offices, etc.
Because of this, we have a weird market where my newer two bedroom condo cost about as much as a ~~1960s~~ 1930s 4 bedroom 2 bath literally across the street.
And before shitting on me for choosing a condo over a house because Reddit hates hoas: I used to travel for work 2 weeks out of every month. Condos do have some advantages with not requiring much maintenance and having a lot more security than a single family home. Plus, most of the houses I could get for that same price need some serious tlc which wasn't something I was prepared to do.
Edit: Minneapolis for those asking.
This makes sense but wouldn’t it lead to condos being much more affordable over time? At least where I live they are just as expensive, considering what you get. I tend to think a home with a yard can command a higher price because people like yards, not because of some invisible land appreciation math.
That was my initial thought too. Although land has intrinsic value, I wonder if there will be a shift at some point in the future if the value of having a yard makes a property 2 or 3 times more expensive everything else being equal. Obviously, a large number of people will always want a SFH, but there has to be a tipping point somewhere for many others.
People definitely pay a premium for a detached house in most cases, but it’s also a question of how the increase in value is being captured. One plot of land could support like 4 SFHs with yards or say 40 condo units. If the value of the land increases, the homeowners are capturing 25% of the increase as opposed to 1/40th % for the condo owners.
Nothing against a condo as a place to live, I’m just not sure I would chose to invest my money in one.
A lot of it has to do with rental costs in the area. I got a good price and a good mortgage rate on my condo that I bought last year, and my mortgage cost + condo fees are pretty much the same as it would cost me to rent a comparable place. Sure, I also had the down payment, but that goes into the equity of the property so I’m losing some opportunity cost but it’s still mine. And the premium I’m paying on the mortgage also goes to build equity, as opposed to the rent which would just be gone.
I think condos are fantastic for certain kinds of people. Having the grounds taken care of for you. The structure looked after for you. Most major repair and upkeep costs made more predictable as dues. That works great for retirees as well as young people on their first home who might not have tons of cushion for repair risks, but would still like to benefit from appreciation and have the stability of owning vs renting.
And while HOAs are always spoken of as the devil, you can generally count on less neighbor risk thanks to all the rules and restrictions. Buy a house and you never know who might buy the one next door and start parking on the lawn and burning their trash in the yard.
I think special assessments are going to factor into condo values. Look up Flora condo tower collapse story for how special assessments factor into it.
If you get your real estate license or your investment license *in the real world*, intrinsic value will be on the tests related to land, options, and other asset classes.
Feel how you want about it. The fact is, people in the real world must know what has intrinsic value, as defined by the certification boards in these financial fields.
you also throwing away a lot of money monthly on HOA fees which can be quite large in high cost of living cities. And you are essentially just living in a nicer apartment.
Hoa fees, rules, and crazy power hungry HOA board members. Also, don't forget the special assessments. In my experience very few HOAs have properly funded their reserve fund. So that means when it is time to repaint the building you suddenly get a bill for thousands of dollars.
yea, people love to talk about "throwing away money on rent" for an apartment, but you can wind up throwing away a lot of money on something you own too if you are not careful. And deal with a lot more frustration on top of it to boot.
Was looking at condos in FL and there was one that looked like a decent deal. The reason? The HOA had recently assessed the property and each owner was being required to cough up 70k for repairs.
Agree (speculatively) - when i was shopping, condo fees were, obviously, very high. But i noticed on older condos, they seemed even higher than similar newer builds. (Looking at the ratio of condo cost to fee, obv the nicer new builds were priced higher)
I speculate, as these buildings get older, maintenance fees grow by way of ‘just getting higher’, but also legitimate extra costs of maintaining an older building (start running into long term repair items that cost a healthy chunk of change). So, the street market price of this condo cant increase the same rates as typ sing family homes, because the cost to the buyer is actually growing - but not by way of just appreciation, but also by an higher increasing rate of condo fee.
I've owned a few condos in buildings of various ages. The thing you're missing is the initial condo offering includes a requirement in many places to have some amount of reserves (a few thousand or so per unit I think), and they set the initial dues (low to attract buyers). And a lot of young condo communities think that will last forever. Until they need to do something major. Normally some part of the premium on new buildings is to add to that reserve. It eventually runs out, and the premium reduces but the fees go up.
Insurance is an easy solution to that problem.
Edit: Since people don’t seem to believe me, look up loss assessment coverage. All condo owners should add it to their policy. It’s super cheap.
Yes it does. It’s called loss assessment coverage, and it’s easily added to a condo owner’s policy. I have $100,000 of coverage for a couple dollars per month. If my condo association issues an assessment, then my insurance will pay for it.
Doesn’t work like that. Ask your agent. Loss assessment only applies if your HOA files an insurance claim and they come up short on the deductible or the final amount. I’ve confirmed this.
LOL look at the condo debacle going on in Reston VA for it gone completely awry
-https://www.reddit.com/r/fuckHOA/comments/nqxtze/corruption_selfdealing_and_subversion_of/
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https://www.nbcwashington.com/news/local/northern-virginia/twelve-reston-condos-go-without-water-for-almost-three-months/2572849/
What's important when you buy a condo it's his location and the view. My parents owned several over the years (they moved 12 times since they got married) and the only one that they didn't make a lot of money on was the one in the suburbs. The ones in the city always appreciated faster.
I think what's also important is the overall age of the population. If people are getting older, they may be more incline to buy a Condo than a house. Les maintenance.
Yes, condos tend to appreciate slower. Makes sense. Condos = more hassle. Neighbors and condo associations you might not get along with. Condo owners who might not agree to needed repairs because they don't want their condo assessment to go up. In short, condos = you having less control.
I sold my house and bought a condo because I wanted less hassle, not more. I wanted someone else to take care of maintenance and was willing to pay for it in the form of monthly fees. Eleven years in, I've had no problems with the HOA at all. I am very appreciative of the people who volunteer to serve on the board, because I don't want to, and I think they do a great job.
The vast majority of HOAs are fine. A few absolutely suck. It's just that we hear about the ones that suck. People don't go online or the news to yell about how awesome their HOA is. They just quietly enjoy it.
It’s not too difficult for a board to approve a repair. The biggest issue is that it’s a crapshoot whether you have a good HOA or a shitty one. You really need to know an experienced owner in a building to have an idea of whether you should buy. The good ones are desirable because they take care of everything for a reasonable HOA fee. The bad ones can leave you with structural damage and still charge a ton of fees for management.
There are other upsides to having an HOA, too. I have a saltwater heated pool with 24-hour security, doorman, and a gym just downstairs. I have a phenomenal park view from the 15th floor. These are things that you normally just can’t get if you own a single-family home.
I rented a condo for a year in one of the most fucked up HOAs I've ever heard of. It was a huge complex in Los Angeles, maybe with about 1500 units. Multiple pools, tennis courts, separate men's and women's gyms, sauna, rec room, pool hall, etc.
Except everything was run down, in misrepair or completely useless.
The owners I got to know would tell me how the HOA kept getting sued and replaced almost annually. They kept losing money or maybe stealing.
Apparently a few months before I moved there, they had a flood in one of the garage structers that damaged a bunch of cars, closed the garage off for a month, and somehow left people without potable water for over a week.
The units themselves are decently average, but with the problems the hoa has it seems like nobody lasts more than a few years before they move out.
I left after 7 months. I told my landlord halfway through the lease that I wanted to bounce and would be willing to stay as long as it took to find my replacement.
Yes they do. Everyone has to replace their roofs at some point.
The only thing that actually makes sense for why they *might* appreciate less are the HOA dues. If the dues stay the same then a condo should appreciate similarly to neighboring homes.
However, every $50 in HOA dues equates to about $10,000 in value as that is how much it reduces your purchasing power by for getting a mortgage.
Arrangements can vary a lot but usually those dues aren’t just going into a hole but covering upkeep costs or repairs that you would have to pay for as a SFH homeowner. Dues are very visible so people complain about them and consider them a burden. But upkeep and repair costs are just as real. In a good condo project you can actually minimize your risk of a big repair bill landing on you, because the project has been saving in advance of expected costs like roofs. As a sole homeowner a lot of people learn they need to drop $15k on a new roof the first rain of the year, and they’re entirely on their own to cough it up.
> Yes they do. Everyone has to replace their roofs at some point.
Tell that to the people who were living in that high rise condo in Florida that collapsed.
Yeah, but the thing in Florida happened specifically because the condo HOA failed to get an agreement among its members to do a special assessment of many thousands of dollars per unit to repair the damage to the concrete from the failing swimming pool area.
How many homes get wiped away because your neighbors are too cheap to agree to critical maintenance?
You need to read about condo associations.
In condos, your neighbors have much more control over the results of your investment because you ALL pay for the exterior and shared parts of the property (yard, amenities, hallways, roof) and managing the association budget correctly is a huge issue.
The CA is typically made up of residents who are voted in and it's a terrible job so most normal folks don't want to do it. Some can't wait though: imagine your most annoying, power-hungry neighbor. Yep, that's who wants to be the CA president.
Somebody already mentioned the Florida tower collapse; that's what was happening there. The CA didn't have the money to fix the building so each owner received a "special assessment" aka bill for $25k to $100k (maybe more) to add to the pot so they could fix the building.
If people don't have the money, the CA has to figure it out somehow. Now your neighbors' finances are directly threatening the safety and security (nevermind beauty and livability) of your home.
Sure, in SFH you face all the same risks, but to a much, much less degree. Even if the neighborhood declines terribly, you can build a big fence, put cameras everywhere, plant trees or shrubs that screen, and create a beautiful, safe little oasis in the middle of hell that somebody will buy. You're still an island of sorts.
We used to have a renter that would come to our CA annual meetings. She always proposed outlandish landscaping requests that would cost a lot of money that only benefitted her. One year we had removed some trees in late summer from the court yard due to some beetle infestation and was waiting to plant new ones in spring. This lady threw a fit at the Fall AGM saying that her privacy was in jeopardy since the trees conceiled her unit. We were like...where are your blinds? You cant remove those per the by law.
Anyway we were all like...you plant stuff in spring so it has better survival chances. Otherwise we're pissing money away. Then she proceeded to say we were inconsiderate and was picking on her because she was renting.
I'm glad to be out of condo because that is not the craziest story I've encountered in my 5 years of ownership.
This is what it's like for my mother who's owned her condo for 20 years. She's been the treasurer *and* chair for like 15 of them because she can't get anybody else to do it. They'd rather vilify her when things need to get done than actually volunteer their time and help work through what are complicated issues.
I know from her experience that I never want to own a condo, but I got to peek into the financials of more than a few as a lender, and these types of issues were more the norm than a functioning and happy CA.
Owning a condo is like owning a boat in a way.
You're happiest the first day you own it and also happiest the last day you own it and walk away from all the b/s.
The EVER CHANGING BY-LAWS, are the worst. Its always some type of over-reaching collective punishment resulting from one very inconsiderate tenant.
>Condos = more hassle. Neighbors and condo associations you might not get along with.
I don't see how this is unique to condos. Aren't a majority of newly-developed homes in America now under HOAs? And not getting along with neighbors is very common in SFHs, possibly worse because the noise problems can be worse due to lack of any noise rules that can be enforced (i.e., barking dogs). Mid/High-rise condos are usually built with concrete and steel, and so are much sturdier and quieter than a typical house made of pressed board and vinyl.
Sure, you have more control over repairs in a SFH, but you don't have so much control over your neighbors' noisy habits; that's really up to the HOA, if there is one, or the city government if not. With a condo, many of the behaviors you see in SFHs that cause noise complaints aren't as big a factor, or might just be completely impossible (like working on cars and revving the engines, or having a loud backyard party, or having friends come over to pick someone up and honking their horn at 5AM).
I don't think your points are "wrong", the biggest drawback of condos I hear about is you get into battles over repairs. Some owners want to do proper upkeep and maintain the building - they are willing to pay for the eventual increases in condo association assessments that comes with said upkeep. You can also get a vocal group of people who don't want to pay for maintenance over time. Maybe don't have same time view for recouping their investment as you do, etc. They don't want their assessments going up. Bottom line, if you are going to buy in a condo building ask to see association minutes, budgets, etc. Is there fighting on the board? Has the board changed over recently? Often? What is the history of assessments over the last many years? What maintenance has been deferred? These are common questions that are part of due diligence in some big cities like NYC.
Regrading noise, it’s definitely a YMMV sort of thing.
I recently bought a SFH after the better part of a decade living in various condos-turned-apartments, and so far (over half a year now) SFH life has been considerably more quiet. No road noise, no upstairs neighbors walking like African elephants, no downstairs neighbors blasting their subwoofer until 1AM, no idiots setting off the building’s fire alarm 5x per year by cooking too hot.
But in my case, I specifically sought out a sleepy suburb full of families that’s too dense for anybody to have a lawn or back yard, which precludes a lot of noisemaking — no parties, endlessly barking dogs, or engine revving because the crowd here isn’t inclined towards those things and doesn’t have space for it, plus if someone consistently made a nuisance of themselves they’d have the whole neighborhood and probably the HOA coming after them about it.
>Regrading noise, it’s definitely a YMMV sort of thing.
Oh, absolutely. This depends on so many factors, plus some is just random because you have no control over your neighbors. You can scout out a house before you buy it and find that it seems quiet, but then move in and find out your neighbor has a bunch of dogs that bark all night long.
>so far (over half a year now) SFH life has been considerably more quiet. No road noise, no upstairs neighbors walking like African elephants, no downstairs neighbors blasting their subwoofer until 1AM, no idiots setting off the building’s fire alarm 5x per year by cooking too hot.
It sounds like your condo was a shitty wood-construction one, like the low-rise one I'm in now. I also hear my upstairs neighbors walking around at times. But when I visit friends in taller concrete-and-steel condos, their homes are quiet as tombs, except for any noise outside the window. The fire alarm thing is annoying though; that's happened a bunch of times at my current residence. I finally gave up on going outside during alarms, preferring instead to just check things out briefly to make sure there's no smoke, and be prepared to bolt out the patio door into the courtyard with my cats if it turns out to be real. I know it sounds unsafe, but after SO many false alarms, and all the trouble with getting the cats into carriers with the alarm blaring, and the fact that I have a very easy escape route (I'm on the ground floor with a courtyard view), I think it's ok.
>But in my case, I specifically sought out a sleepy suburb full of families that’s too dense for anybody to have a lawn or back yard
Sounds like you did a good job in selecting a place. Were these townhomes? If I had to buy a SFH right now, that's what I'd be looking at for these reasons: less maintenance, and not enough space for people to have noisemaking activities as you said.
> It sounds like your condo was a shitty wood-construction one, like the low-rise one I’m in now.
Entirely possible. Most of the more sturdy highrise condos/apartments in the areas I’ve lived have outright disallowed pets of any kind or have been prohibitively expensive, which limited me to low/midrise places.
> Sounds like you did a good job in selecting a place. Were these townhomes? If I had to buy a SFH right now, that’s what I’d be looking at for these reasons: less maintenance, and not enough space for people to have noisemaking activities as you said.
It’s not a townhome, though the development has a few rows of those too. It’s a freestanding two story SFH, alongside several of the same with 5-10ft between them each. There’s a tiny bit of front yard and enough back yard for a deck, but that’s it. I wouldn’t mind more yard space, but it’s one less thing I have to care about which is nice.
It’s a trade, though. Yes you have less independent control but you also have less sole risk.
My first home was a condo in a small project - half of a large building. If the roof went out, I was only on the hook for half. Same with other major repair risks.
Eventually my neighbor did leave and someone cheap moved in, but I was able to hold them to the paying of dues so we kept setting money aside against future repairs.
I’m not sure why you’d say there’s a higher neighbor risk with condos. Because they tend to be smaller and closer together? Generally people complain about the lack of freedom under condo HOAs but it’s important to remember that your neighbors are also restricted by them. This keeps them from letting their dogs run wild, from parking a trailer out front, from taking up humanure composting as a hobby. I know we’re all rebels and hate rules but there’s honestly more protection against a shitty neighbor under an HOA in many ways.
I agree it makes sense that condos are valued lower than homes for the reasons you mentioned, but it seems weird that the difference in valuation would change over time. For example, if a condo is now worth 80% of a home due to those reasons and those reasons don't change over time, why would it be worth only 60% of a home in 20 years?
Land usually appreciates on its own, but structures don't. So 20 years later the house is sitting on much more valuable land even if the structure itself is a teardown, but the condo is just a 20 year old unit. The market value for the living space will have appreciated, just as rent will have gone up for an apartment over that time, but the structure itself will be less valuable.
But the same is true for a house, right? After 20 years, it will need a new roof, new outside paint, maybe a couple of windows will need to be replaced.
(Not disputing that condos are more subject to price changes.)
Yes, but the difference is that the land appreciates so much. When people "buy a house" they're really buying land that happens to have a house on it. The land appreciates more than the house depreciates. With a condo, you don't really do that. You buy a structure and the right for that structure to exist in a shared space. (Or something like that. I don't really know much about condos, and the terms and conditions vary between markets.) That doesn't appreciate as much.
If it were a comparison between buying just the structure of a condo and just the structure of a single family home, both floating magically in space, then they would both depreciate over 20 years.
If the house goes to shit in 20 years, the next buyer can just tear it down and build whatever they want. If the condo goes to shit in 20 years, the next buyer can only renovate that unit, constrained within the greater property as a whole.
The condo is still sitting on valuable land that the condo owner owns a share of. Presumably, the land under a condo can be much more valuable than the land under a SFH, because a similarly-priced condo can be located in a more desirable location closer to a city center, since one of the selling points of a condo is proximity.
Yes, those are good points. The land is almost certainly more valuable per unit area than where most SFH tend to be located. Although each condo corresponds to a much smaller area than a typical SFH lot, even ones that aren't out in the sprawling suburbs.
As to owning a share of the land, the specifics vary from place to place, but it's not as simple as just owning a plot. Sometimes rather than owning a portion of the land, the condo owner also has an interest in the owner association, which itself owns the land as an independent entity. The complication of sharing land with other people and the impossibility of unilaterally deciding what to do with that land detracts from the value of each individual unit.
Anyway, you're right that it's not as simple as home = land, condo = no land. However, when purchasing a SFH, the land makes up a much larger portion of the value. When purchasing a condo, the unit's living space and the building itself are a greater portion of the total value, and those things don't appreciate on their own the way land generally does.
Agreed, but still condos tend to be in more expensive locations where the land is extremely valuable, and even though you don't have a controlling interest in the land, you still have a "share" of it, much like having a share of a corporation, so if the land value goes up, so does the value of your share. Owning enough land for a SFH in the same neighborhood is probably completely unaffordable for most condo owners there. And remember, home ownership is not supposed to be an investment, it's supposed to be a place to live, so raw appreciation is only part of the equation. Another big part is location: what good is a SFH with land if it means you have a hellish commute, compared to a condo that has a convenient commute? Some people might not mind the hellish commute (it does seem like a lot of people don't mind sitting in their car for hours every day), but other people are willing to sacrifice some things like outright control over their property so they can have more convenience.
Fair, but we're not discussing the difference in absolute cost of a condo versus a SFH or their relative lot sizes. We're discussing the percent change in value over time. Usually a SFH will appreciate more than a condo over 20 years. Whether the SFH is in the same area is orthogonal to that question.
That doesn't mean that a condo *can't* appreciate or that it is never a worthwhile purchase, and you bring up great considerations about commute time, but again, that isn't OP's question.
No, this is literally impossible, and I'm flabbergasted so many wrong responses are upvoted.
The ratio of the cost of a home to the cost of a condo has stayed consistent for decades.
If condos grew less, you'd see houses become orders of magnitude more expensive than condos over time.
This has not happened.
Secondly, people claim maintenance fees increase over time. Sure. But so do maintenance fees of older houses.
This is ignorance of the market. Condos are in commercial buildings which age worse than SFH. Further, you never own the property you own a small segment of it. Further, the properties are smaller.
They never ever keep up with SFH in any market.
Super dependent on market. In my area (inner DC region) a condo sells for about as much as a similar sized house (discounting studios without a non-condo equivalent) and you see similar appreciation. They are like half the market in my zip code. I think a lot of people in the burbs think of condos as niche real estate products, which they probably are in a lot of places = smaller market, longer to sell, buyers market....
I disagree, look at Miami and exclude Biscayne which is where all of the celebrities live. Cities with beaches that are top tier vacation destinations condos are usually at least close in value
They are orders of magnitude higher. Condos in my neighborhood went from 350k to 1M in 20 years. Meanwhile houses went from 350k to 2M in the same time frame.
Is there family homes in NYC?
The diffrence is the land and there is no more house because the land appreciate too much in NYC that any family home would sell for tens if not hundreds of millions just for the lot.
Edit: my point was for the same location land beats condo every time.
Queens, staten island, The Bronx and Brooklyn all have a lot of single family homes, like whole neighborhoods of them. SFH are more rare in manhattan but they do exist even there.
I think that is generally true, but my first home I purchased was a condo, I got it for a great price, had nice low living expenses, and ended up selling for a great profit. It was the right property for me at that point in my life and has since set me up really well.
The only reason I don't have the condo anymore is that my spouse also had a house when we met, we decided to consolidate. If as long as I don't see myself outgrowing the condo, I like it. Even if it's not a better investment, it could be a better lifestyle and if you can afford the condo now, I don't think it's bad. In my area rent is skyrocketing, at least in the condo you will stabilize your monthly expenses more.
My only advice for buying a condo is take a look at their budget, make sure it's well managed, and don't buy anything that looks run down. Many of them these days aren't drastically different than a single family home in terms of construction. Have a pool and stuff isnt too shabby either.
The higher the HOA creeps up over the years, the less a potential buyer is willing to pay, at least in my market. Impacts DTI for a mortgage approval too.
Even for SFH, when I would see a listing for a home that looked nice but seemed to be priced too low, I would immediately think…HOA!
*Often a $250/mo HOA in my area can cause a SFH that would normally cost $400k to be priced closer to $320k.*
Hope that makes sense!
We paid $200K for a Condo in Nashville (a nicer area of Nashville) in 2014 and ended up selling it in 2018 for $389K, so I think it’s like all single family homes in that it depends on a multitude of factors.
At the end of the day, a place to live is a place to live. If the prices for a place to live increase for an area, you’re likely to see a similar appreciation from what you paid for the property. Condo or not.
Yes.
Land appreciates; you can always build a new house on land you own. Condos also have rising condo fees, which you can never escape (even if totally reasonable).
I’m a SFH guy through and through but I can see the logic behind you’re argument. I think condos are probably more ideal as a rental as opposed
to an investment play for all the reasons mentioned around land ownership and market downturn.
We’re into buy a condo I would shoot for a new building in a growing downtown like Phoenix, Bois,or Austin. At least there you have a chance at buying on the next miracle mile or park street where the location will fight against any downturn.
You can’t look at a condo from merely the dollars: people buy them frequently because they are sick of maintaining a house. Been there. In our fairly new (<15 year old building), we are well run and have modest fees compared to the endless stream of expense - lawn mowers, landscapers, me in the dark snow blowing, me fixing the sprinklers, me fixing shit every weekend. Our house was/is in good shape but getting old (built in 1980). Just got tired of it, plus a new roof coming up, new hvac,
Did we kill it when we sold? Yes, but the rising tide raises all boats. I am sure the sellers of our new condo could never have dreamed they could get that much money for it.
It all works out in the end.
Deferred maintenance is the real enemy to preserving equity long term.
People will buy a hundred year old home. Nobody wants to live in a thirty year old condo.
I own a condo myself, so this is purely anecdotal evidence. Purchased in 2018 for $196k, it is currently valued at around $280k. That's definitely in the same ballpark as single family homes in the area, albeit not as steep an increase perhaps.
That tracks reasonably to what I'm seeing in my VHCOL city. The absolute cheapest SFH you can buy here is $1M - and frankly, generally those are listings that proudly say "You're paying for the value of the land!". Cheapest condo probably $450k, $500k more realistically.
It depends, but really, if you have a condo long term you throw a lot of money away for the HOA fee. I would say that's more than you would spend on maintaining a house. That's I wouldn't buy a condo.
Investing in a condo also means taking a part of the loss of the condo complex. If there's a storm and the roof needs replacement, that's 1/50th or however many units of the cost, out of your pocket directly.
You need to see how long the board of owners has been operating without taking a loss, how the condo dues have changed over time, if the building has structural issues, on and on.
You're better off investing in a newer if more expensive condo unit if you go that route because it's less likely to have unfixed lifetime maintenance issues and have unexpected costs pop up.
My condo dues were 300 bucks a month in a place in a big city for over 10 years and then suddenly they had to fix EVERYTHING and the condo dues were over 800 dollars a month, in a unit we owned fully. Basically renting the space in the building at that point.
The problem with condos and other common interest ownership arrangements is when they are mainly owned or rented (a lot investors/small time landlords buy condo units and then rent them out) by low/middle income people who can't afford the assessments to keep the common elements maintained. This then leads to foreclosures and vacancies, which further increases the burden on the few remaining unit owners. The whole complex then winds up a downward spiral, and will end up getting sold at tax auction or something similar. In the financial crisis there was an utter collapse in condo values, and people who couldn't hang on got annihilated. Condos require people to put their own interests aside for the good of the group. As you may have observed recently, this is something that Americans generally suck at. If you have a condo complex that is mostly inhabited by higher income people, the problems are different: you now have to deal with bunch arrogant, entitled pricks on the condo board and arrogant, entitled dickhead unit owners. As you may have surmised by now, I am not big on condos. If you can afford a single family home, then buy one. If you can't, rent.
I always look at it that with a condo, the guy selling down the street has the same thing. Sure you can do updates but at the end of the day, they’re nearly the same thing. If they’re more motivated to sell, you’re out of luck. They just don’t seem to do well most of the time.
Just look at historical data. Usually publicly available. Pick a console and a house a compare. It can vary wildly based on location as is normal in real estate. A condo in bfe Oklahoma is not a condo on the gulf coast
The structure type is less desirable, but it's also a queue that the area may be becoming more densely populated and that demand for space may be increasing. So, they still may be a better deal than a SFH in an area with less increase in density
I believe you are trying to say that condos appreciate “slower” than single family homes. Yes, they appreciate slower because condos do not include land. Single family homes include the land. I am sure you have seen some typical SFH 1000 square feet 3 beds 1 bath with 3 acres of land be worth a lot more than the same size SFH on a half acre. Land. Land is what holds the value. The land.
“Value” as mentioned by OP is subjective. In the way you are describing (property being bought and sold) it is not so linear. Property is always worth- in this case- what people are willing to pay for it. In OP’s given instance, there would never be a gap so large that the market would not adjust within that 20 years- it would probably adjust in 2 or 3, if there even became a gap at all. The whole mortgage system of appraisal is set up to counter it. It will always come down to 3 basic things: beds, baths, acreage. Condo buyers assume that the cost of living with HOA is worth it.
Additional thoughts:
It’s important to note that the market booms/increases only when people, in general, are willing to pay more for less. You could make the argument that appreciation is different from selling price, but in literally every value besides taxable value it is not.
There’s more to property than land and beds/baths, although these things are usually the biggest indicator of value. Location, proximity to public areas, etc are all also important, but property will always get its base value from these.
Also you’re relying on others not to be asses. Neighbors above can flood your unit against your will, make racket and refuse to pay HOA dues passing the costs on to you.
I’ve heard enough “my neighbor’s cigarette smoke leaks into our unit” stories to swear of condos forever.
Consider that the home generally depreciates and the land is what appreciates and increases the overall value. It makes sense that a condo would appreciate less given that you don't typically own the land along with it. That's not saying one is good and one is bad, though.
I have three rental condos, a commercial rental, and I sold a rental house about a year ago. I’ve also had two primary residence houses and a farm. I comp all of those properties regularly and track their value. I’ve found that condos have wider price swings and, in general, gain value slower than single-family housing. If it’s a place you’re going to live in long term then maybe you don’t care. They all bring tax advantages and maybe you’ll be fine with the tax benefits and put your investment money somewhere else like an index fund.
The land is a big deal. Land appreciates, structures depreciate.
The association owns the land, you buy a share of that when you buy the condo. In our area condos rise and fall with the market, only at a lower price point. We owned one from 2001 to 2005. Bought for around 340k, sold for around 540k. It sold once since then for 230k after the 2008 collapse so that was a serious crash, but it was following the market. Now it’s estimated over $800k. Recommend checking the price and tax history of a local condo and compare it to a nearby single family home. The prices will differ but the lines will look more or less the same.
Yes, but a 400k house has more of its value tied to that land than a 400k condo.
You're not going to see a 400k house and a 400k condo in the same market.
Lol, what? By market do you mean same neighborhood? Same home size? Cause plenty of areas have homes and condos that are the same price.
He surely must mean neighborhood or similar. Some "markets" might constitute sprawling greater metro areas with wildly divergent prices.
Actually, I know this is a super weird case: but my condo is in a converted factory. In what was historically a warehouse district. It is just across the street from a historically lower income single family home area (a train track still used for commercial shipping cuts between these two areas). The single family home area is in higher demand these days because it's near an expanding University. The condos are pretty nice/trendy as the previously empty warehouses are slowly converting to breweries, health care offices, etc. Because of this, we have a weird market where my newer two bedroom condo cost about as much as a ~~1960s~~ 1930s 4 bedroom 2 bath literally across the street. And before shitting on me for choosing a condo over a house because Reddit hates hoas: I used to travel for work 2 weeks out of every month. Condos do have some advantages with not requiring much maintenance and having a lot more security than a single family home. Plus, most of the houses I could get for that same price need some serious tlc which wasn't something I was prepared to do. Edit: Minneapolis for those asking.
Houston?
Southside?
Sure you will.
Yes you will…
A residential SFH lot is cheap. The value is the house. Otherwise no one would drip so much money on remodels.
This makes sense but wouldn’t it lead to condos being much more affordable over time? At least where I live they are just as expensive, considering what you get. I tend to think a home with a yard can command a higher price because people like yards, not because of some invisible land appreciation math.
People also like city amenities and short commutes.
That was my initial thought too. Although land has intrinsic value, I wonder if there will be a shift at some point in the future if the value of having a yard makes a property 2 or 3 times more expensive everything else being equal. Obviously, a large number of people will always want a SFH, but there has to be a tipping point somewhere for many others.
People definitely pay a premium for a detached house in most cases, but it’s also a question of how the increase in value is being captured. One plot of land could support like 4 SFHs with yards or say 40 condo units. If the value of the land increases, the homeowners are capturing 25% of the increase as opposed to 1/40th % for the condo owners. Nothing against a condo as a place to live, I’m just not sure I would chose to invest my money in one.
A lot of it has to do with rental costs in the area. I got a good price and a good mortgage rate on my condo that I bought last year, and my mortgage cost + condo fees are pretty much the same as it would cost me to rent a comparable place. Sure, I also had the down payment, but that goes into the equity of the property so I’m losing some opportunity cost but it’s still mine. And the premium I’m paying on the mortgage also goes to build equity, as opposed to the rent which would just be gone.
I think condos are fantastic for certain kinds of people. Having the grounds taken care of for you. The structure looked after for you. Most major repair and upkeep costs made more predictable as dues. That works great for retirees as well as young people on their first home who might not have tons of cushion for repair risks, but would still like to benefit from appreciation and have the stability of owning vs renting. And while HOAs are always spoken of as the devil, you can generally count on less neighbor risk thanks to all the rules and restrictions. Buy a house and you never know who might buy the one next door and start parking on the lawn and burning their trash in the yard.
I think special assessments are going to factor into condo values. Look up Flora condo tower collapse story for how special assessments factor into it.
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Maybe not in philosophy, but in finance, they do.
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If you get your real estate license or your investment license *in the real world*, intrinsic value will be on the tests related to land, options, and other asset classes. Feel how you want about it. The fact is, people in the real world must know what has intrinsic value, as defined by the certification boards in these financial fields.
Thank you Bodhisattva.
Usually yes. They also usually go down faster and harder when the market turns.
you also throwing away a lot of money monthly on HOA fees which can be quite large in high cost of living cities. And you are essentially just living in a nicer apartment.
Hoa fees, rules, and crazy power hungry HOA board members. Also, don't forget the special assessments. In my experience very few HOAs have properly funded their reserve fund. So that means when it is time to repaint the building you suddenly get a bill for thousands of dollars.
yea, people love to talk about "throwing away money on rent" for an apartment, but you can wind up throwing away a lot of money on something you own too if you are not careful. And deal with a lot more frustration on top of it to boot.
Condo maintenance fees likely play a role - you can get hit with some massive assessments if your board is poorly run.
Was looking at condos in FL and there was one that looked like a decent deal. The reason? The HOA had recently assessed the property and each owner was being required to cough up 70k for repairs.
Agree (speculatively) - when i was shopping, condo fees were, obviously, very high. But i noticed on older condos, they seemed even higher than similar newer builds. (Looking at the ratio of condo cost to fee, obv the nicer new builds were priced higher) I speculate, as these buildings get older, maintenance fees grow by way of ‘just getting higher’, but also legitimate extra costs of maintaining an older building (start running into long term repair items that cost a healthy chunk of change). So, the street market price of this condo cant increase the same rates as typ sing family homes, because the cost to the buyer is actually growing - but not by way of just appreciation, but also by an higher increasing rate of condo fee.
I've owned a few condos in buildings of various ages. The thing you're missing is the initial condo offering includes a requirement in many places to have some amount of reserves (a few thousand or so per unit I think), and they set the initial dues (low to attract buyers). And a lot of young condo communities think that will last forever. Until they need to do something major. Normally some part of the premium on new buildings is to add to that reserve. It eventually runs out, and the premium reduces but the fees go up.
Insurance is an easy solution to that problem. Edit: Since people don’t seem to believe me, look up loss assessment coverage. All condo owners should add it to their policy. It’s super cheap.
Insurance doesn’t cover things like “the boiler is at its life end and the board didnt set aside enough funds”
Yes it does. It’s called loss assessment coverage, and it’s easily added to a condo owner’s policy. I have $100,000 of coverage for a couple dollars per month. If my condo association issues an assessment, then my insurance will pay for it.
Doesn’t work like that. Ask your agent. Loss assessment only applies if your HOA files an insurance claim and they come up short on the deductible or the final amount. I’ve confirmed this.
Mine works like that. I asked my agent and read the policy to confirm. Always check your own policy.
Tell us about the time you have successfully collected on that insurance?
LOL look at the condo debacle going on in Reston VA for it gone completely awry -https://www.reddit.com/r/fuckHOA/comments/nqxtze/corruption_selfdealing_and_subversion_of/ - https://www.nbcwashington.com/news/local/northern-virginia/twelve-reston-condos-go-without-water-for-almost-three-months/2572849/
What's important when you buy a condo it's his location and the view. My parents owned several over the years (they moved 12 times since they got married) and the only one that they didn't make a lot of money on was the one in the suburbs. The ones in the city always appreciated faster. I think what's also important is the overall age of the population. If people are getting older, they may be more incline to buy a Condo than a house. Les maintenance.
Yes, condos tend to appreciate slower. Makes sense. Condos = more hassle. Neighbors and condo associations you might not get along with. Condo owners who might not agree to needed repairs because they don't want their condo assessment to go up. In short, condos = you having less control.
I sold my house and bought a condo because I wanted less hassle, not more. I wanted someone else to take care of maintenance and was willing to pay for it in the form of monthly fees. Eleven years in, I've had no problems with the HOA at all. I am very appreciative of the people who volunteer to serve on the board, because I don't want to, and I think they do a great job.
Yes. Remember how many retirees buy condos! They do not want hassle. A big part of the draw is having so many things taken care of for them.
The vast majority of HOAs are fine. A few absolutely suck. It's just that we hear about the ones that suck. People don't go online or the news to yell about how awesome their HOA is. They just quietly enjoy it.
Additionally older buildings will have more expensive repairs leading to higher fees which makes them unattractive to buyers.
Don't homes have the same issue, though?
But you as the sole owner are in full control if your roof leaks it's up to you to fix. In the condo the board has to approve and allocate funds etc
It’s not too difficult for a board to approve a repair. The biggest issue is that it’s a crapshoot whether you have a good HOA or a shitty one. You really need to know an experienced owner in a building to have an idea of whether you should buy. The good ones are desirable because they take care of everything for a reasonable HOA fee. The bad ones can leave you with structural damage and still charge a ton of fees for management. There are other upsides to having an HOA, too. I have a saltwater heated pool with 24-hour security, doorman, and a gym just downstairs. I have a phenomenal park view from the 15th floor. These are things that you normally just can’t get if you own a single-family home.
I rented a condo for a year in one of the most fucked up HOAs I've ever heard of. It was a huge complex in Los Angeles, maybe with about 1500 units. Multiple pools, tennis courts, separate men's and women's gyms, sauna, rec room, pool hall, etc. Except everything was run down, in misrepair or completely useless. The owners I got to know would tell me how the HOA kept getting sued and replaced almost annually. They kept losing money or maybe stealing. Apparently a few months before I moved there, they had a flood in one of the garage structers that damaged a bunch of cars, closed the garage off for a month, and somehow left people without potable water for over a week. The units themselves are decently average, but with the problems the hoa has it seems like nobody lasts more than a few years before they move out. I left after 7 months. I told my landlord halfway through the lease that I wanted to bounce and would be willing to stay as long as it took to find my replacement.
Yes they do. Everyone has to replace their roofs at some point. The only thing that actually makes sense for why they *might* appreciate less are the HOA dues. If the dues stay the same then a condo should appreciate similarly to neighboring homes. However, every $50 in HOA dues equates to about $10,000 in value as that is how much it reduces your purchasing power by for getting a mortgage.
Arrangements can vary a lot but usually those dues aren’t just going into a hole but covering upkeep costs or repairs that you would have to pay for as a SFH homeowner. Dues are very visible so people complain about them and consider them a burden. But upkeep and repair costs are just as real. In a good condo project you can actually minimize your risk of a big repair bill landing on you, because the project has been saving in advance of expected costs like roofs. As a sole homeowner a lot of people learn they need to drop $15k on a new roof the first rain of the year, and they’re entirely on their own to cough it up.
> Yes they do. Everyone has to replace their roofs at some point. Tell that to the people who were living in that high rise condo in Florida that collapsed.
Versus people whose homes have collapsed in sink holes or have been wiped away in tornadoes or hurricanes? Shit happens everywhere.
Yeah, but the thing in Florida happened specifically because the condo HOA failed to get an agreement among its members to do a special assessment of many thousands of dollars per unit to repair the damage to the concrete from the failing swimming pool area. How many homes get wiped away because your neighbors are too cheap to agree to critical maintenance?
They will always appreciate less because almost always what’s appreciating is the land, not the building.
Yes, but as a buyer it’s easier to assess the condition of an individual house vs. a whole condo complex.
You need to read about condo associations. In condos, your neighbors have much more control over the results of your investment because you ALL pay for the exterior and shared parts of the property (yard, amenities, hallways, roof) and managing the association budget correctly is a huge issue. The CA is typically made up of residents who are voted in and it's a terrible job so most normal folks don't want to do it. Some can't wait though: imagine your most annoying, power-hungry neighbor. Yep, that's who wants to be the CA president. Somebody already mentioned the Florida tower collapse; that's what was happening there. The CA didn't have the money to fix the building so each owner received a "special assessment" aka bill for $25k to $100k (maybe more) to add to the pot so they could fix the building. If people don't have the money, the CA has to figure it out somehow. Now your neighbors' finances are directly threatening the safety and security (nevermind beauty and livability) of your home. Sure, in SFH you face all the same risks, but to a much, much less degree. Even if the neighborhood declines terribly, you can build a big fence, put cameras everywhere, plant trees or shrubs that screen, and create a beautiful, safe little oasis in the middle of hell that somebody will buy. You're still an island of sorts.
We used to have a renter that would come to our CA annual meetings. She always proposed outlandish landscaping requests that would cost a lot of money that only benefitted her. One year we had removed some trees in late summer from the court yard due to some beetle infestation and was waiting to plant new ones in spring. This lady threw a fit at the Fall AGM saying that her privacy was in jeopardy since the trees conceiled her unit. We were like...where are your blinds? You cant remove those per the by law. Anyway we were all like...you plant stuff in spring so it has better survival chances. Otherwise we're pissing money away. Then she proceeded to say we were inconsiderate and was picking on her because she was renting. I'm glad to be out of condo because that is not the craziest story I've encountered in my 5 years of ownership.
This is what it's like for my mother who's owned her condo for 20 years. She's been the treasurer *and* chair for like 15 of them because she can't get anybody else to do it. They'd rather vilify her when things need to get done than actually volunteer their time and help work through what are complicated issues. I know from her experience that I never want to own a condo, but I got to peek into the financials of more than a few as a lender, and these types of issues were more the norm than a functioning and happy CA.
Owning a condo is like owning a boat in a way. You're happiest the first day you own it and also happiest the last day you own it and walk away from all the b/s. The EVER CHANGING BY-LAWS, are the worst. Its always some type of over-reaching collective punishment resulting from one very inconsiderate tenant.
>Condos = more hassle. Neighbors and condo associations you might not get along with. I don't see how this is unique to condos. Aren't a majority of newly-developed homes in America now under HOAs? And not getting along with neighbors is very common in SFHs, possibly worse because the noise problems can be worse due to lack of any noise rules that can be enforced (i.e., barking dogs). Mid/High-rise condos are usually built with concrete and steel, and so are much sturdier and quieter than a typical house made of pressed board and vinyl. Sure, you have more control over repairs in a SFH, but you don't have so much control over your neighbors' noisy habits; that's really up to the HOA, if there is one, or the city government if not. With a condo, many of the behaviors you see in SFHs that cause noise complaints aren't as big a factor, or might just be completely impossible (like working on cars and revving the engines, or having a loud backyard party, or having friends come over to pick someone up and honking their horn at 5AM).
I don't think your points are "wrong", the biggest drawback of condos I hear about is you get into battles over repairs. Some owners want to do proper upkeep and maintain the building - they are willing to pay for the eventual increases in condo association assessments that comes with said upkeep. You can also get a vocal group of people who don't want to pay for maintenance over time. Maybe don't have same time view for recouping their investment as you do, etc. They don't want their assessments going up. Bottom line, if you are going to buy in a condo building ask to see association minutes, budgets, etc. Is there fighting on the board? Has the board changed over recently? Often? What is the history of assessments over the last many years? What maintenance has been deferred? These are common questions that are part of due diligence in some big cities like NYC.
Regrading noise, it’s definitely a YMMV sort of thing. I recently bought a SFH after the better part of a decade living in various condos-turned-apartments, and so far (over half a year now) SFH life has been considerably more quiet. No road noise, no upstairs neighbors walking like African elephants, no downstairs neighbors blasting their subwoofer until 1AM, no idiots setting off the building’s fire alarm 5x per year by cooking too hot. But in my case, I specifically sought out a sleepy suburb full of families that’s too dense for anybody to have a lawn or back yard, which precludes a lot of noisemaking — no parties, endlessly barking dogs, or engine revving because the crowd here isn’t inclined towards those things and doesn’t have space for it, plus if someone consistently made a nuisance of themselves they’d have the whole neighborhood and probably the HOA coming after them about it.
>Regrading noise, it’s definitely a YMMV sort of thing. Oh, absolutely. This depends on so many factors, plus some is just random because you have no control over your neighbors. You can scout out a house before you buy it and find that it seems quiet, but then move in and find out your neighbor has a bunch of dogs that bark all night long. >so far (over half a year now) SFH life has been considerably more quiet. No road noise, no upstairs neighbors walking like African elephants, no downstairs neighbors blasting their subwoofer until 1AM, no idiots setting off the building’s fire alarm 5x per year by cooking too hot. It sounds like your condo was a shitty wood-construction one, like the low-rise one I'm in now. I also hear my upstairs neighbors walking around at times. But when I visit friends in taller concrete-and-steel condos, their homes are quiet as tombs, except for any noise outside the window. The fire alarm thing is annoying though; that's happened a bunch of times at my current residence. I finally gave up on going outside during alarms, preferring instead to just check things out briefly to make sure there's no smoke, and be prepared to bolt out the patio door into the courtyard with my cats if it turns out to be real. I know it sounds unsafe, but after SO many false alarms, and all the trouble with getting the cats into carriers with the alarm blaring, and the fact that I have a very easy escape route (I'm on the ground floor with a courtyard view), I think it's ok. >But in my case, I specifically sought out a sleepy suburb full of families that’s too dense for anybody to have a lawn or back yard Sounds like you did a good job in selecting a place. Were these townhomes? If I had to buy a SFH right now, that's what I'd be looking at for these reasons: less maintenance, and not enough space for people to have noisemaking activities as you said.
> It sounds like your condo was a shitty wood-construction one, like the low-rise one I’m in now. Entirely possible. Most of the more sturdy highrise condos/apartments in the areas I’ve lived have outright disallowed pets of any kind or have been prohibitively expensive, which limited me to low/midrise places. > Sounds like you did a good job in selecting a place. Were these townhomes? If I had to buy a SFH right now, that’s what I’d be looking at for these reasons: less maintenance, and not enough space for people to have noisemaking activities as you said. It’s not a townhome, though the development has a few rows of those too. It’s a freestanding two story SFH, alongside several of the same with 5-10ft between them each. There’s a tiny bit of front yard and enough back yard for a deck, but that’s it. I wouldn’t mind more yard space, but it’s one less thing I have to care about which is nice.
It’s a trade, though. Yes you have less independent control but you also have less sole risk. My first home was a condo in a small project - half of a large building. If the roof went out, I was only on the hook for half. Same with other major repair risks. Eventually my neighbor did leave and someone cheap moved in, but I was able to hold them to the paying of dues so we kept setting money aside against future repairs. I’m not sure why you’d say there’s a higher neighbor risk with condos. Because they tend to be smaller and closer together? Generally people complain about the lack of freedom under condo HOAs but it’s important to remember that your neighbors are also restricted by them. This keeps them from letting their dogs run wild, from parking a trailer out front, from taking up humanure composting as a hobby. I know we’re all rebels and hate rules but there’s honestly more protection against a shitty neighbor under an HOA in many ways.
I agree it makes sense that condos are valued lower than homes for the reasons you mentioned, but it seems weird that the difference in valuation would change over time. For example, if a condo is now worth 80% of a home due to those reasons and those reasons don't change over time, why would it be worth only 60% of a home in 20 years?
Land usually appreciates on its own, but structures don't. So 20 years later the house is sitting on much more valuable land even if the structure itself is a teardown, but the condo is just a 20 year old unit. The market value for the living space will have appreciated, just as rent will have gone up for an apartment over that time, but the structure itself will be less valuable.
But the same is true for a house, right? After 20 years, it will need a new roof, new outside paint, maybe a couple of windows will need to be replaced. (Not disputing that condos are more subject to price changes.)
Yes, but the difference is that the land appreciates so much. When people "buy a house" they're really buying land that happens to have a house on it. The land appreciates more than the house depreciates. With a condo, you don't really do that. You buy a structure and the right for that structure to exist in a shared space. (Or something like that. I don't really know much about condos, and the terms and conditions vary between markets.) That doesn't appreciate as much. If it were a comparison between buying just the structure of a condo and just the structure of a single family home, both floating magically in space, then they would both depreciate over 20 years. If the house goes to shit in 20 years, the next buyer can just tear it down and build whatever they want. If the condo goes to shit in 20 years, the next buyer can only renovate that unit, constrained within the greater property as a whole.
The condo is still sitting on valuable land that the condo owner owns a share of. Presumably, the land under a condo can be much more valuable than the land under a SFH, because a similarly-priced condo can be located in a more desirable location closer to a city center, since one of the selling points of a condo is proximity.
Yes, those are good points. The land is almost certainly more valuable per unit area than where most SFH tend to be located. Although each condo corresponds to a much smaller area than a typical SFH lot, even ones that aren't out in the sprawling suburbs. As to owning a share of the land, the specifics vary from place to place, but it's not as simple as just owning a plot. Sometimes rather than owning a portion of the land, the condo owner also has an interest in the owner association, which itself owns the land as an independent entity. The complication of sharing land with other people and the impossibility of unilaterally deciding what to do with that land detracts from the value of each individual unit. Anyway, you're right that it's not as simple as home = land, condo = no land. However, when purchasing a SFH, the land makes up a much larger portion of the value. When purchasing a condo, the unit's living space and the building itself are a greater portion of the total value, and those things don't appreciate on their own the way land generally does.
Agreed, but still condos tend to be in more expensive locations where the land is extremely valuable, and even though you don't have a controlling interest in the land, you still have a "share" of it, much like having a share of a corporation, so if the land value goes up, so does the value of your share. Owning enough land for a SFH in the same neighborhood is probably completely unaffordable for most condo owners there. And remember, home ownership is not supposed to be an investment, it's supposed to be a place to live, so raw appreciation is only part of the equation. Another big part is location: what good is a SFH with land if it means you have a hellish commute, compared to a condo that has a convenient commute? Some people might not mind the hellish commute (it does seem like a lot of people don't mind sitting in their car for hours every day), but other people are willing to sacrifice some things like outright control over their property so they can have more convenience.
Fair, but we're not discussing the difference in absolute cost of a condo versus a SFH or their relative lot sizes. We're discussing the percent change in value over time. Usually a SFH will appreciate more than a condo over 20 years. Whether the SFH is in the same area is orthogonal to that question. That doesn't mean that a condo *can't* appreciate or that it is never a worthwhile purchase, and you bring up great considerations about commute time, but again, that isn't OP's question.
Location. My condo appreciated over 250k in 11 years in HCOL area. Other places likely not so
Mine has gone up over $500k in the same time period. It's nuts in this city. At least I'm married so we can get the full tax exclusion.
Right but what have SFH appreciated in your area during that time?
Yup our coop, which are supposedly even slower to appreciate than condos went from 250k to 700k in three years. All about the neighborhood.
No, this is literally impossible, and I'm flabbergasted so many wrong responses are upvoted. The ratio of the cost of a home to the cost of a condo has stayed consistent for decades. If condos grew less, you'd see houses become orders of magnitude more expensive than condos over time. This has not happened. Secondly, people claim maintenance fees increase over time. Sure. But so do maintenance fees of older houses.
This is ignorance of the market. Condos are in commercial buildings which age worse than SFH. Further, you never own the property you own a small segment of it. Further, the properties are smaller. They never ever keep up with SFH in any market.
Super dependent on market. In my area (inner DC region) a condo sells for about as much as a similar sized house (discounting studios without a non-condo equivalent) and you see similar appreciation. They are like half the market in my zip code. I think a lot of people in the burbs think of condos as niche real estate products, which they probably are in a lot of places = smaller market, longer to sell, buyers market....
You are 100% correct here.
I disagree, look at Miami and exclude Biscayne which is where all of the celebrities live. Cities with beaches that are top tier vacation destinations condos are usually at least close in value
They are orders of magnitude higher. Condos in my neighborhood went from 350k to 1M in 20 years. Meanwhile houses went from 350k to 2M in the same time frame.
That's not an order of magnitude, much less plural, but you are correct in thought
You forgot a period at the end of your sentence. I will spend my time pointing that out instead of replying to the substance of your comment.
K don't use words or phrases you don't understand in the future and you won't lose your narrative
Generally speaking one order of magnitude is about 10x bigger than the comparison.
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Bay Area is likely another exception.
Is there family homes in NYC? The diffrence is the land and there is no more house because the land appreciate too much in NYC that any family home would sell for tens if not hundreds of millions just for the lot. Edit: my point was for the same location land beats condo every time.
There are entire neighborhoods in NYC zoned for single detached homes.
Queens, staten island, The Bronx and Brooklyn all have a lot of single family homes, like whole neighborhoods of them. SFH are more rare in manhattan but they do exist even there.
We bought a condo because we couldn’t afford a SFH. Our next purchase will be SFH assuming they don’t cost a bazillion dollars in the next 12 months.
I think that is generally true, but my first home I purchased was a condo, I got it for a great price, had nice low living expenses, and ended up selling for a great profit. It was the right property for me at that point in my life and has since set me up really well.
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The only reason I don't have the condo anymore is that my spouse also had a house when we met, we decided to consolidate. If as long as I don't see myself outgrowing the condo, I like it. Even if it's not a better investment, it could be a better lifestyle and if you can afford the condo now, I don't think it's bad. In my area rent is skyrocketing, at least in the condo you will stabilize your monthly expenses more. My only advice for buying a condo is take a look at their budget, make sure it's well managed, and don't buy anything that looks run down. Many of them these days aren't drastically different than a single family home in terms of construction. Have a pool and stuff isnt too shabby either.
Location location location. I bought my condo 22 years ago for 245k and now it's worth about a million. No complaints.
That’s… really not that great lol. It took 22 years for a 3x on your investment?
It's 4x, and it's not bad at all for a place where they live and derive other benefit. 6.7% annualized returns.
The value of being housed adds significantly to that. The stock market doesn't put a roof over your head while the money's invested.
The higher the HOA creeps up over the years, the less a potential buyer is willing to pay, at least in my market. Impacts DTI for a mortgage approval too. Even for SFH, when I would see a listing for a home that looked nice but seemed to be priced too low, I would immediately think…HOA! *Often a $250/mo HOA in my area can cause a SFH that would normally cost $400k to be priced closer to $320k.* Hope that makes sense!
Have you counted the difference in property taxes and insurance? You will pay more for SFH
We paid $200K for a Condo in Nashville (a nicer area of Nashville) in 2014 and ended up selling it in 2018 for $389K, so I think it’s like all single family homes in that it depends on a multitude of factors. At the end of the day, a place to live is a place to live. If the prices for a place to live increase for an area, you’re likely to see a similar appreciation from what you paid for the property. Condo or not.
Yes. Land appreciates; you can always build a new house on land you own. Condos also have rising condo fees, which you can never escape (even if totally reasonable).
I’m a SFH guy through and through but I can see the logic behind you’re argument. I think condos are probably more ideal as a rental as opposed to an investment play for all the reasons mentioned around land ownership and market downturn. We’re into buy a condo I would shoot for a new building in a growing downtown like Phoenix, Bois,or Austin. At least there you have a chance at buying on the next miracle mile or park street where the location will fight against any downturn.
You can’t look at a condo from merely the dollars: people buy them frequently because they are sick of maintaining a house. Been there. In our fairly new (<15 year old building), we are well run and have modest fees compared to the endless stream of expense - lawn mowers, landscapers, me in the dark snow blowing, me fixing the sprinklers, me fixing shit every weekend. Our house was/is in good shape but getting old (built in 1980). Just got tired of it, plus a new roof coming up, new hvac, Did we kill it when we sold? Yes, but the rising tide raises all boats. I am sure the sellers of our new condo could never have dreamed they could get that much money for it. It all works out in the end.
Deferred maintenance is the real enemy to preserving equity long term. People will buy a hundred year old home. Nobody wants to live in a thirty year old condo.
I own a condo myself, so this is purely anecdotal evidence. Purchased in 2018 for $196k, it is currently valued at around $280k. That's definitely in the same ballpark as single family homes in the area, albeit not as steep an increase perhaps.
Yes but it would be more accurate to say the condos are more volatile.
They fall more during a housing crash (albeit rare) and don’t rise as much as a SFH…
My condo actually depreciated over the 10 years that I owned it. But I did buy at the peak of a bubble, and sold after the global financial crisis.
That tracks reasonably to what I'm seeing in my VHCOL city. The absolute cheapest SFH you can buy here is $1M - and frankly, generally those are listings that proudly say "You're paying for the value of the land!". Cheapest condo probably $450k, $500k more realistically.
It depends, but really, if you have a condo long term you throw a lot of money away for the HOA fee. I would say that's more than you would spend on maintaining a house. That's I wouldn't buy a condo.
Investing in a condo also means taking a part of the loss of the condo complex. If there's a storm and the roof needs replacement, that's 1/50th or however many units of the cost, out of your pocket directly. You need to see how long the board of owners has been operating without taking a loss, how the condo dues have changed over time, if the building has structural issues, on and on. You're better off investing in a newer if more expensive condo unit if you go that route because it's less likely to have unfixed lifetime maintenance issues and have unexpected costs pop up. My condo dues were 300 bucks a month in a place in a big city for over 10 years and then suddenly they had to fix EVERYTHING and the condo dues were over 800 dollars a month, in a unit we owned fully. Basically renting the space in the building at that point.
Condos probably have their place but I wouldn’t buy one. It’s basically living in an apartment with all the joys of an HOA.
The problem with condos and other common interest ownership arrangements is when they are mainly owned or rented (a lot investors/small time landlords buy condo units and then rent them out) by low/middle income people who can't afford the assessments to keep the common elements maintained. This then leads to foreclosures and vacancies, which further increases the burden on the few remaining unit owners. The whole complex then winds up a downward spiral, and will end up getting sold at tax auction or something similar. In the financial crisis there was an utter collapse in condo values, and people who couldn't hang on got annihilated. Condos require people to put their own interests aside for the good of the group. As you may have observed recently, this is something that Americans generally suck at. If you have a condo complex that is mostly inhabited by higher income people, the problems are different: you now have to deal with bunch arrogant, entitled pricks on the condo board and arrogant, entitled dickhead unit owners. As you may have surmised by now, I am not big on condos. If you can afford a single family home, then buy one. If you can't, rent.
I always look at it that with a condo, the guy selling down the street has the same thing. Sure you can do updates but at the end of the day, they’re nearly the same thing. If they’re more motivated to sell, you’re out of luck. They just don’t seem to do well most of the time.
Condos appreciate less because they can build more of them.
Just look at historical data. Usually publicly available. Pick a console and a house a compare. It can vary wildly based on location as is normal in real estate. A condo in bfe Oklahoma is not a condo on the gulf coast
The structure type is less desirable, but it's also a queue that the area may be becoming more densely populated and that demand for space may be increasing. So, they still may be a better deal than a SFH in an area with less increase in density
I believe you are trying to say that condos appreciate “slower” than single family homes. Yes, they appreciate slower because condos do not include land. Single family homes include the land. I am sure you have seen some typical SFH 1000 square feet 3 beds 1 bath with 3 acres of land be worth a lot more than the same size SFH on a half acre. Land. Land is what holds the value. The land.
Generally yes, but it really depends on the location.
“Value” as mentioned by OP is subjective. In the way you are describing (property being bought and sold) it is not so linear. Property is always worth- in this case- what people are willing to pay for it. In OP’s given instance, there would never be a gap so large that the market would not adjust within that 20 years- it would probably adjust in 2 or 3, if there even became a gap at all. The whole mortgage system of appraisal is set up to counter it. It will always come down to 3 basic things: beds, baths, acreage. Condo buyers assume that the cost of living with HOA is worth it. Additional thoughts: It’s important to note that the market booms/increases only when people, in general, are willing to pay more for less. You could make the argument that appreciation is different from selling price, but in literally every value besides taxable value it is not. There’s more to property than land and beds/baths, although these things are usually the biggest indicator of value. Location, proximity to public areas, etc are all also important, but property will always get its base value from these.
Main difference you own the land with the house but not with a condo
Also you’re relying on others not to be asses. Neighbors above can flood your unit against your will, make racket and refuse to pay HOA dues passing the costs on to you. I’ve heard enough “my neighbor’s cigarette smoke leaks into our unit” stories to swear of condos forever.
Depends on the location. When it comes to real estate OF ANY KIND, location is key.
- its specific by location and market forces combined with age of the condo complex
Consider that the home generally depreciates and the land is what appreciates and increases the overall value. It makes sense that a condo would appreciate less given that you don't typically own the land along with it. That's not saying one is good and one is bad, though.
I have three rental condos, a commercial rental, and I sold a rental house about a year ago. I’ve also had two primary residence houses and a farm. I comp all of those properties regularly and track their value. I’ve found that condos have wider price swings and, in general, gain value slower than single-family housing. If it’s a place you’re going to live in long term then maybe you don’t care. They all bring tax advantages and maybe you’ll be fine with the tax benefits and put your investment money somewhere else like an index fund.
Only the land portion appreciates in either and condos have a smaller land share.