Townhome Market Shows Signs Of A Comeback

Dated: 02/24/2015

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Townhouse construction was back on the rise in 2014, as home buyers show an increasing appetite for this type of housing once again. 

Single-family attached starts totaled 19,000 in the fourth quarter of 2014 – 12 percent higher than a year prior, according to Census data. For all of 2014, townhouse construction starts totaled 72,000, up from 68,000 starts in 2013.

The market share of townhouses comprises 12 percent of all single-family starts. The peak for townhouse construction was during the first quarter of 2008 when it reached 14.6 percent.

During the recent recession, the townhome market plunged, particularly as the number of first-time home buyers fled the market. But as the number of first-time home buyers rebounds, construction of town homes is expected to rise again too.

“The prospects for townhouse construction over the long run are positive given large numbers of home buyers looking for medium density residential neighborhoods, such as urban villages that offer walkable environments and other amenities,” writes Robert Dietz, an economist for the National Association of Home Builders, on NAHB’s Eye on Housing blog.

REALTORS® are upbeat about townhome prospects in the District of Columbia, North Dakota, Colorado, Texas, California, Florida, Hawaii, and Alaska, according to the December 2014 REALTORS® Confidence Index Survey.

However, REALTORS® continue to be concerned about the condo market overall, reporting that obtaining Federal Housing Administration financing for condos remains a big hurdle for home buyers because many condos continue to not meet FHA eligibility criteria. Existing condo and co-op sales fell 3.5 percent on a seasonally adjusted annual rate in January; they remain 1.8 percent below year ago levels, the National Association of REALTORS® reported in its latest housing report.  

Read more: Only 30% of Condo Buildings Are FHA Approved

“Condominiums offer an affordable option and are the first step to home ownership for many home buyers,” NAR President Chris Polychron said in a recent statement. “NAR has urged FHA to develop policies that will give buyers access to more flexible and affordable financing opportunities and a wider choice of approved condo developments.”

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