Thanks to Gen Y Townhome Construction Headed Up

The desire for urban, walkable settings has the younger generation of homebuyers keen on townhouses.

By + More

My family lives in a townhouse outside of Washington, D.C., in a neighborhood called Fairlington. The community has a sense of neighborhood that reminds me of the traditional Midwestern suburbs of Dayton, Ohio, where I grew up. Yet, the complex is just a few miles from a major city and right next to the urban village of Shirlington, which means groceries, restaurants, and shops are all within walking distance.

This feeling of community and "walkability" are among the positive benefits offered by many townhouse neighborhoods, and part of the reason why townhome construction overall has been on an upward trend for the past 20 years. While the sector took a big hit thanks to the housing crisis, more recently the market share of attached single-family housing has been growing since 2009.

[RELATED: December Home Prices Rise Most in 6 Years]

Overall, only a minority of homebuyers seek such mixed-use neighborhoods, according to a survey of homebuyer preferences by the National Association of Home Builders. But the data also indicate that demand for these types of communities is stronger among younger households.

A National Association of Home Builders survey finds the construction industry is suffering from a shortage of workers.
A National Association of Home Builders survey finds the construction industry is suffering from a shortage of workers.

More than a third of Generation Y households (born after 1977) are seeking such mixed use residential locations, the survey reported. As potential homebuyers age, that preference falls dramatically with only one in five Baby Boomers expressing an interest in owning a townhome.

[READ: 90 Percent of U.S. Cities Post Home Price Gains]

Interestingly, the same is true with preferences for newer developments in established, older neighborhoods, with half of Generation Y households and 42 percent of Generation X households (1965 to 1976) wanting homes in established neighborhoods, but smaller shares for Baby Boomers and those born before 1945. Whether these preferences are due to lifecycle effects or true generational changes in demand is an open question.

Nonetheless, the share of new townhome construction has been rising after dipping during the Great Recession, when first-time homebuyers found it increasingly difficult to qualify for a mortgage to buy a home.

According to Census data, as measured on a one-year moving average, the share of single-family starts built as attached, single-family housing is now 12 percent, less than the recent peak share of almost 15 percent set in 2008. But the market share rising back to its long-run increasing trend. In terms of raw numbers, 66,000 townhomes were built in 2012, compared to only 45,000 in 2011.

This is a form of housing construction that will continue to gain strength, as more first-time homebuyers enter the market and as generational preferences shift to more walkable, medium-density locations.

More News:

  • Docs: FBI Kept Close Watch on Gore Vidal
  • Pope to Be Called 'Emeritus Pope'
  • As Sequester Looms, Messaging Intensifies
  • Robert Dietz is an economist with the National Association of Home Builders (NAHB). Previously an economist with the Congressional Joint Committee on Taxation, Robert writes on housing and policy issues at NAHB's economics blog Eye on Housing. Follow Robert on Twitter at @dietz_econ. The information presented here does not necessarily represent the views of NAHB or its membership.