Does the condo allow you to do short-term rentals? If so, then since you are planning to spend much of your vacation time on the mainland I would go with the condo because you won't have to worry about external maintenance and upkeep while you are away, and you can still rent it out. Even if you have a kid in the next couple of years you won't outgrow it for awhile. You can pay extra toward the mortgage/build up equity and trade up if/when you need to. Being able to bike to work will be good for lots of reasons (saves money, saves time, saves the environment, promotes good health).
BTW, you are making me seriously want to move to Kauai, even though I've never been there! Didn't realize reasonably affordable housing was available anywhere other than the Big Island.....
Thank you both for the good points. Having enough room for toys is a good point. The people at the condo office said that they allow short-term rentals, but no timeshare rentals. By this, they mean that you can't rent it out weekly. I told them that I would rent it out to one person for one month during the winter and maybe do a house swap in the summer. They said that it's fine. I would need to look at the fine print before I purchased. I would have more control with renting it out if it was a single family home, but then I would have more maintenance when I'm gone.
The housing prices I listed are not typical and are on the bottom of the scale. However, I would argue that they are realistic. My two previous purchases were ugly houses that no one wanted and were significantly below the median for the city. I like buying ugly houses that require a cosmetic rehab. If you want something that doesn't require any work, I think prices start around 450K for a single family.
When you start to get around 500K, many houses have a studio apartment attached that could bring in $1,000-$1,300/month. I think you can charge $1300 if you allow dogs. Very few places accept dogs. I would laminate flooring and allow dogs to get the most out of the studio rental.
I think there are a lot of service jobs on the island that pay $11-$13 and hour, so many people on the island are poor. When people talk about Hawaii being expensive, I think it's a combination of the prices, but also lower service wages. If you have a good paying job, I would do it. If you are moving here to be waiter, it will be tough because you will be competing with everyone else that is trying to do the same thing. If you are 19 and live with 5 other guys in a 3 bedroom house, then maybe you will be able to pay your bills fine.
When I opened my checking account they asked me to pick an income bracket. I think they do this, so they know how to flag larger transactions. My lowest choice was 20K and my highest choice was 65K. I can't believe the highest choice was 65K. I think many people on the island with service jobs are poor.