LAS VEGAS — The house of tomorrow may be a townhouse.
Rising construction prices and higher land costs have more builders and buyers turning to the high-density urban models.
Young buyers like the central location of most townhouses, too.
“If you look at the last four quarters of data of production of townhomes, the single-family attached market is up 24 percent,” said Robert Dietz, chief economist of the National Association of Home Builders. “It’s growing eight times as fast as the overall single-family market.”
With new home prices soaring, builders are hunting ways to produce more affordable houses. But finding land priced right for traditional homes — particularly in urban markets — is a challenge.
Townhouses are increasingly an option, Dietz said.
“Townhouse construction tends to be a little smaller and more entry-level-market and more dense,” he said. “We see this as a great growth potential for the home building market.”
Townhouse starts totaled 14 percent of the total building market in 2018 — tied for the highest rate of construction ever, according to the NAHB.
“It’s the way out of some of those supply side headwinds,” he said at the building industry’s annual meeting this week in Las Vegas. “This kind of home is selling.
“It’s just a question of whether builders can build it.”
Builders often have to compete with apartment developers for townhouse land. And cities can lag in providing proper zoning for the product.
There can be pushback from traditional homeowners, too.
When a large new home community in Fort Worth, Texas, recently added townhouses to its offering mix, homeowners in the development protested the move.
Builders started about 1,459 townhouses in the Dallas-Fort Worth area in 2018, according to Dallas housing analyst Residential Strategies. That was only about a 4 percent share of the market.
“This compares to the previous market peak in second quarter 2006, when there were 2,541 annual townhouse starts, representing a 5 percent share of market,” said Residential Strategies principal Ted Wilson.
Wilson said townhouses are attracting more D-FW buyers.
“Over the past three years, townhouse construction has grown by 126 percent,” he said. “With housing affordability being a significant challenge for many first-time buyers, townhomes offer an affordable solution.
“Incredibly, we have noted that there have even been family buyers for townhouses in some of the preferred school districts.”
Empty nesters seeking to downsize are also attracted to the smaller homes.
Danushka Nanayakkara of the NAHB’s forecasting and analysis department said the industry is forecasting continued townhouse growth.
“This is a very appealing market for the millennials that want to walk to work and restaurants in an urban location,” she said. “It’s a way for builders to have more density.”
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