Many buyers turn to lower-priced townhomes in high-density communities for their first homes, but they may underestimate how costly these homes can be compared to single-family houses.
What it means: High homeowner association fees can complicate the calculations involved in townhome ownership. Anyone willing to look nationwide could find themselves in a larger home for less money.
“Most first-time buyers should anticipate making some sort of compromise on their home purchase,” says NewHomeSource chief economist Ali Wolf. “That could involve location, home size, bed/bath count, or even product type. In an era of very high housing costs, some compromises are reasonable to ensure you buy a home and begin building wealth. However, don’t push it if you reach a point where you’re no longer excited about the home.”
Benefits of Townhouses
Lower maintenance: HOAs manage exterior and common area upkeep, making townhomes ideal for empty nesters, retirees, couples, and smaller households.
Security: Many townhome communities provide gated entry, security patrols, and enhanced surveillance systems.
Desirable locations: Townhomes are often situated closer to urban cores, offering improved walkability and access to culture and amenities. They are also more frequently integrated into mixed-use communities.
Cons of Townhomes
HOA fees: Monthly homeowners’ association fees can significantly increase housing costs.
Regulations and restrictions: HOAs may impose limits on renovations, parking, and exterior modifications.
Less space: Townhomes typically have less square footage, storage, and private outdoor space.
Less privacy: Shared walls with neighbors can result in noise and space constraints.
Not always cheaper: Sometimes, single-family homes may be the more affordable option. Additional fees associated with homeownership, including those related to a homeowner’s association, can raise overall costs.
Go Deeper: Here are the top three markets where the difference between the estimated payments for single-family homes and townhomes is the smallest – assuming a 7% mortgage and a 20% down payment.
In Cleveland, the average estimated payment for a single-family home is a 16.1% discount compared to that of a townhome, followed by Houston (12.7% discount) and Modesto (8.5% discount).
In eight of the 10 highlighted markets, single-family homes have a lower estimated payment than townhomes.
Four of the 10 markets still show single-family homes as more expensive than townhomes (Modesto, Stockton, San Jose, and Phoenix) based on home price.
Among these, the two California markets exhibited lower payments for single-family homes due to their high HOA fees.
In Modesto, the average single-family home price was $571.3K with a $34 HOA fee, while the average townhome was $555.9K with an average HOA fee of $403.
In Stockton, the average single-family price was $773.4K with a $61 HOA fee, while the average townhome was $770.2K with an average HOA fee of $150.
Steve Ladurantaye
Steve Ladurantaye is senior vice president of content at NewHomeSource.