Townhomes or Single Family Detached? This is a question I get asked all of the time. Which is better? Like all things in life, it depends on your situation. I am going to break down the pros and cons of each so you are confident going into your next home purchase.
I have helped countless clients buy both townhomes and single family detached homes here in the Charleston area. For the sake of simplicity, I am going to shorten Single Family Detached to just Single Family. So that we’re on the same page, a townhome is connected to other homes in a row, they share a wall but you still have your own space. A single family home stands on their own, no walls connecting with neighboring houses. Towards the end I will give my thoughts on condominium units as well and how they compare to townhomes.
So first, let’s compare the size you’re going to get in each. As a rule, single family homes will typically be larger than townhomes. Now I pulled the sales data for Charleston, SC in 2022 and I am sure other markets are similar. In 2022, only 18% of townhomes sold were greater than 2,000 sqft. Contrast that with single family homes where 54% of homes sold were greater than 2,000 sqft. The numbers are even more skewed for homes that were greater than 2,500 sqft. In this case, only 4% of townhomes sold were larger than 2,500 sqft, but over 31% of Single Family homes were greater than 2,500 sqft.
I think there’s a couple of reasons for this. First, the proverbial “starter” home doesn’t really exist like they used to. In today’s real estate market, bigger is better. People like more square footage, more bedrooms, more bathrooms, and flex space to use as offices or playrooms. This has disincentivized builders from constructing smaller homes that might have just 2 bedrooms, or 1 bathroom. This has left a void in the housing market, though, and we’ve actually seen townhomes fill this void. Townhomes, and to a lesser extent Condos, are the new starter homes, but even now townhome construction has been declining over the past couple of decades. If you take a look at a graph from the National Association of Homebuilders which displays the amount of new townhome construction. It peaked back in 2008, but over the next decade never really got back anywhere close to pre financial crisis levels.
Another reason why larger townhomes don’t exist is that the footprint for each home needs to be similar. Townhomes will typically share a roof or foundation, so the homes must be similar in size, and the most efficient size tends to be from 1,000 to 2,000 square feet.
And here’s my last point on size. If someone has the means to buy an incredibly large townhome, they will typically just choose a single family instead. As far as lifestyle goes, people who want or need larger houses typically don’t want to live in a townhome. On the flip side, if having a sprawling home with empty rooms isn’t for you, then maybe a townhome would best suit you.
Which leads us to our next key difference. That is, price. On average, a townhome of the same size as a single family home in the same location will usually be 15-25% less expensive. So, if you’re shopping for a home on a budget, this could make townhomes much more appealing.
Even if townhomes are less expensive, many people are still hesitant. We have to get to the underlying cause or why people do not favor townhomes. Here’s a conversation I have with my buyers, particularly first time homebuyers. So many homes shoppers are looking to buy their proverbial dream home, when in reality they’ll only be living there between 2 and 5 years.
I might recommend townhomes in this case. And here’s why; The Federal Reserve recently published a study that says homeowners have a networth that is 40x higher than renters. That’s 40x, not 40%. Getting you into a home is more important for your long term financial position than the type of home you buy. If the difference is between owning an affordable townhome versus renting an apartment, data shows that owning that townhome is going to make you better off in the long run. Time in the market is much more important than timing the market, no matter the asset class, and real estate is no different. Besides, there has been no period greater than 14 years in the history of the United States where real estate has lost value.
So the reason I say all of this is that yes, townhomes are less expensive, and they might make sense if you’re shopping for a home on a budget.
The third difference I want to address between single family homes and townhomes is operating costs and maintenance. As a rule, townhomes will cost more to maintain than single family homes.
Think about it. A townhome community more closely resembles communal living than a single family neighborhood. And you will pay more for that. I want to bring up the age-old metaphor called “Tragedy of the Commons”.
This is a concept that, should a number of people, let’s call them homeowners, enjoy unfettered access to a resource such as a park, they will tend to overuse it, and may end up destroying its value altogether. To exercise voluntary restraint is not a rational choice for individuals – if they did, other homeowners would merely supplant them, and the predictable result is a tragedy for all.
And as much as I hate to say it, this is why we have homeowners associations. The HOA protects people from themselves by creating rules in which to live by. They create rules for parking, for picking up dog poop, and for cleaning up trash. They might even buy homeowners insurance to protect common roofs or exteriors because they don’t trust the individual homeowners to get their own policies. Essentially, they exist to maintain property value.
And while you do pay either a monthly or quarterly fee for all of this work, it’s not too bad! What many people don’t realize is that the money you pay in your HOA dues is used for not only basic upkeep, but for other things too. Many HOAs will cover yard maintenance, exterior maintenance, termite protection, and oftentimes insurance for all of the buildings. They will have reserves set aside for major repairs too, such as roof replacements. It’s crucial you do your due diligence to figure out just what the HOA covers, especially when insurance is concerned.
Let me give you an example. I have a townhome that I use as a rental. I pay $200 per month for HOA, which is $2400 per year. However, I only need an HO6 policy, commonly referred to as a condo policy, because the HOA covers exterior insurance. This saves me about $1000 per year in insurance costs. The HOA also covers a termite bond, which saves me about $300 per year, and takes care of grass cutting and lawn upkeep, which I would otherwise have to pay $50 every two weeks to get it done. So all that to say, I feel as though I come out on top with my particular HOA, even if it seems pretty expensive.
Compare this to a typical single family home. While your HOA dues will probably be less, oftentimes you’ll get less bang for your buck dollar per dollar. You might find a home that doesn’t even have an HOA. In that case, it’s entirely up to you to maintain your property. Some people really despise HOAs, and I totally get that. Some are filled with angry Karens who get offended that your shutters aren’t the right color. But that vast majority are made up of homeowners who want to keep costs down and stay out of people’s lives.
But if you don’t want all the bells and whistles that a townhome community might have, then a single family neighborhood might be your best option, and it might actually be cheaper to maintain.
The last difference between townhomes and single family homes I want to touch on is when it comes to resell value. I want to give you an interesting statistic: In Charleston in 2022, there were 1,804 townhomes sold, compared to 15,937 single family homes. In other words, for every townhome that was sold, 8 and a half single family homes were sold. I suspect this statistic can carry over to other similar markets in the country.
What’s the reason for this? Well, most home shoppers prefer a single family home over a townhome. When we picture the American Dream, it typically involves owning a suburban single family home with a yard for the dogs and the kids.
As a result, because single family homes are more desirable to the average home shopper, they are going to probably be easier to sell, though this does depend on multiple factors. Your buyer pool for townhomes is significantly smaller.
But what happens if you just want to rent out your townhome instead of selling it? I actually think there’s not really a difference here. Think about it, the folks who are looking to rent out a 2, 3, or 4 bedroom apartment are already used to living in a communal environment. A townhome is actually more private and gives easier access to the yard, so in many ways it’s a step up. The website Rentometer.com, which is a fantastic tool to use with analyzing the rental prospects of a property, doesn’t actually consider whether a home is a single family or townhome in determining average rent. The only thing that really matters is bedroom count.
Now, let me give you my brief thoughts on condominiums. Condos are going to be more similar to townhomes than single family, but you’re typically going to have a much smaller size compared to a townhome. Condos are great because they tend to be closer to city centers, whereas similarly priced townhomes and single family homes are further away. So if you’re looking for location over size, condos might be your best bet. However, I would say the biggest drawback to condominium units is how the HOA or regime is organized. Oftentimes, large repairs are required to keep the building structure safe and modern. Most of the time, these costs are borne by the individual homeowners in a particular unit in the form of special assessments. I’m not saying that townhome HOAs don’t have special assessments, but they are more common in Condo units. Also, your monthly HOA or regime fees tend to be much higher compared to a townhome, so that’s something you need to consider when determining if you want to live in a unit like that.
So there you have it, the four most important differences between townhomes and single family homes.
