A Popular Bridge to Homeownership for Younger Buyers

Even though millennials had the largest increase in homeownership rate among all age groups in 2017, many would-be buyers continue to feel stuck on the sidelines because of the limited number of entry-level homes.

Most builders know there’s strong demand for entry-level homes, but the rising costs of construction are making it much more challenging to generate large enough margins to build smaller, single-family detached homes.

Enter the single-family attached homes — aka townhomes. A growing number of buyers are drawn to the relatively large amount of space in a typical townhome, and the potential to still be located within a medium-density, urban neighborhood.

More builders are recognizing the cost benefits of townhomes as well. According to NAHB analysis of Census data, townhome construction in 2017 was up 7% from 2016.

“After a soft patch [in mid-2017], the market share [of new townhouses] is rising again,” wrote NAHB Chief Economist Robert Dietz in the Eye on Housing blog. “I expect future gains as townhouses are a useful bridge from rentership to homeownership for younger prospective home buyers in high-cost markets, among other market opportunities.”

After a dramatic decline during the recession of the late 2000’s, townhouse starts have experienced a steady resurgence. For more analysis,