3 Reasons That Townhouse Sales Will Soar in the Coming Year

Townhomes are coming back into style, and the improving economy will only add fire to the trend. Major cities around the country are ground zero for these new townhome housing starts. Most of the new jobs coming into the country are coming there, and many people are looking for comfortable yet affordable homes to begin building a life.

Let's take a look at the top reasons that townhomes will be a huge trend in the coming months.

Rising Cost of Land & Construction

Developing land is more expensive than it has ever been even with historically low interest rates. Developers are being forced to build outside of municipal limits. The other option is to place a larger number of houses on smaller plots of land - ergo, the rise in townhouse structures. As most people are looking for convenience in their housing, many will choose the smaller structures that are close to work and school districts.

After the 2008 recession, developers had the luxury of being able to build over foreclosures. This was a much cheaper purchase, and in the decade since, that land has been sold and resold at premium over premium. The current prices reflect those hand over hand transactions as well as the natural inflation that comes with a decade of owning land in a healthy economy. Construction costs have also increased, which means that the same money that could have bought crew and materials for a four unit home now only builds a townhouse.

Falling Inventory

Most large cities currently have around 3 months of homes on the market for sale at any given time. This statistic should be at around 6 months in order to create an equilibrium for the market. When it is lower, the market needs new housing starts. Because of the rise in construction and land costs, most of these new starts will be townhomes.

Falling inventory usually affects first time homebuyers more than the average. Homes that sell under the range of jumbo loans are also usually affected more. Both of these metrics point to townhouses more than any other type of home.

Interest Rates Rising

The 4% interest rate for mortgages will not last forever. When it does go up, new homebuyers will find it more difficult to spend money on anything larger than a townhouse. There will still be affordable single family houses, but the deals will be harder to find.

Rising interest rates also signal a more stable marketplace. People will look to make a housing purchase as an investment as well as for the utility. The townhouse offers a good investment at a price that many people can still afford.