Townhome construction on the rise nationwide:
Supply and demand are always a sticky wicket in real estate, especially in the new homes arena. Housing demand continues to outpace supply, and nowhere is that more keenly felt that in the entry-level category. Because of it, pressure has increased on builders to deal with the ongoing high cost of land, materials and labor cuts into profitability by building more attached and semi-attached housing, such as townhomes.
According to the National Association of Home Builders (NAHB), townhouse construction is increasing and is anticipated to grow in the coming years. According to a recent article in BUILDER Magazine’s online entity, from the third quarter of 2017 to the third quarter of 2018, townhouse construction starts totaled 123,000, which is 24 percent higher than the previous four quarters. The market share of new townhouses is now 1.8 percent of all single-family house starts, the highest share since the recession. The peak market share over the past two decades was during the first quarter of 2008 when 14.6 percent of all single-family house starts were townhouses.
The NAHB goes on to report, “On a one-year moving average, new townhouses make up 13.8% of all single-family starts. This marks the highest share of townhome starts since before the recession. The last peak market share was set in Q1 2008 at 14.6% of all single-family homes built.” They add that townhouse construction is likely to expand because of the large first-time buyer market looking for walkable neighborhoods and more city-close locations.
Rates Currently Trending: Neutral
Mortgage rates are trending sideways this morning. Last week the MBS market improved by +40bps. This was enough to move rates lower last week. We saw moderate to high rate volatility last week.