Are Townhomes and Condos the New Starter Homes? Why This Couple Chose One

An image of two people is used to illustrate an article about the housing market. Photo courtesy of Angie Herger and John Bonilla
Angie Herger and John Bonilla started their home search trying to find a single-family house with a yard for their three dogs. The tough housing market led to them buying a townhome instead.
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When Angie Herger and John Bonilla started shopping for their first home in the suburbs of Washington, D.C., they wanted the classic American starter home: A single family house with a yard for their three dogs.

But they soon ran into an uncomfortable reality: Homes in the area had gotten so expensive, they needed to look an hour-plus outside the city to even begin to see affordable options.

“It was tough. It’s hard to find something,” says Bonilla, who works in clinical research at a medical device company; Herger is pediatric chiropractor. Combined, they had a high income, but with student debt payments, their budget felt constrained.

Eventually, the couple started considering a less expensive option: a condo or townhome that would allow them to afford something closer to the city. Their struggle reveals a jarring truth for many American home buyers right now. The traditional single-family starter home is vanishing, rendered out of reach by skyrocketing costs, including dramatically higher mortgage rates.

A recent analysis by the New York Times showed how decades of rising home prices and larger builds has created a shortage of small, entry-level houses for new buyers. It’s leading people like Herger and Bonilla—along with real estate agents—to wonder: Are condos and townhomes the new starter home?

Townhomes and Condos Offer Affordability and Flexibility

The trend toward condos and townhomes as starter homes, it turns out, may not be all that new.

“To me, [condos] were always an option as a starter home,” says Shane Herbert, who has been in real estate for 18 years, mostly in Utah, and is now founder and CEO of the real estate firm Bureau One. 

In some ways, it’s a misnomer to think “starter home” must mean “single-family home.” While home prices have jumped considerably during the pandemic, Herbert says, they’ve been rising steadily for quite some time, meaning countless people have faced the same dilemma as Herger and Bonilla.

But affordability is not the only reason that young buyers are drawn to condos and townhomes.

“I also see a trend that people are wanting more flexibility in their lives. Travel is more important. Life experience is more important,” Herbert says. “With a condo, in a lot of ways, you’re buying some independence.”

That’s because, with a condo, owners are not responsible for exterior maintenance—things like mowing the lawn or clearing the driveway. Owning a condo is sort of like owning an apartment in that way: You’re only responsible for what’s on the inside (unless you have a townhome with a yard).

This arrangement frees up time for more travel and life experience. And because it limits what renovations you can do, it can also save you some money, Herbert says.

So while the rising cost of single-family-home ownership is certainly a big factor, Herbert thinks condos and townhomes are also well-suited to the millennial lifestyle.

“There is an equal movement and desire for people to have a different quality of life,” Herbert says.

What You Need to Know About Condos

If you’re ready to start seriously considering a condo or townhome purchase, you should know there are a few differences compared to buying a single family home.

The big difference is that condos and townhomes are governed by homeowners associations, also known as HOAs. These organizations will charge a monthly fee in return for managing the building or complex and taking care of exterior repairs like roofs or windows.

Herbert says it’s important to do your due diligence on the HOA: Make sure you know what it does and doesn’t cover. And look into its finances to verify that it’s managing its money well, and can handle repairs when they come up.

Generally, if a complex appears to be neat and well taken care of, that’s a good sign that the HOA is competent, Herbert says.

When it comes time to do a home inspection, you also want to make sure that your inspector considers the exterior components of the building, even if you’re not responsible for them, Herbert says. The condition of the property as a whole can affect the resale value of your unit, so you’ll want to understand what condition the building is in.

A Better Choice for Their Lifestyle

Herger and Bonilla did end up purchasing a townhome—just a lot farther out of D.C. than they initially planned.

The couple returned to Puerto Rico this summer to be closer to family and friends, and paid $499,000 for a new-construction unit on the island.

The real estate market in Puerto Rico is unique for many reasons, and Herger admitted that the cost of their townhome was relatively high, but the couple was able to afford it due to Bonilla’s “mainland salary.” (The median household income in Puerto Rico is $22,000, compared to the national figure of nearly $70,000, according to Census data)

If they had purchased a single-family home, their budget would have bought them a small fixer-upper, which they didn’t have the interest or additional funds to tackle. A new or renovated single-family home in their area would have run between $600,000 and $1.7 million, according to Herger.

Bonilla is still somewhat anxious that they paid too much for their home, or bought at a time when interest rates were too high. But if they had waited, it might have only gotten worse.

“It’s just the fear of the unknown,” Bonilla says.