Townhomes are heating up the market!

First-time homebuyers are flocking to the townhouse product. 

Everest explores the implications of the trend—and why this market is so hot. 

It’s a townhome takeover!

If you haven’t noticed, townhome communities have been booming in recent years. These individual neighborhoods or “complexes” feature multiple multi-floor homes with shared amenities, HOA oversight, and perhaps most notably—competitive price points! 

Generally speaking, individual townhomes are larger than the average apartment but smaller than the typical single-family home, making them a convenient choice for a diversity of buyers. In particular, first-time homebuyers who have been priced out of today’s single-family market are now discovering the many benefits of these communities. 

Before we break down the pros and cons, it’s important to understand how townhomes differ from similar housing styles. 

Battle of the Building Types 

So, what distinguishes a townhouse from a condo or PUD? We often see these terms used interchangeably, but there are key differences every serious buyer must know. 

Townhomes

Often governed by an HOA, townhomes are multi-story dwellings built in rows or clusters within a gated community or neighborhood. While buyers own the actual structure, they may or may not own the land on which it sits (including the front and back yards). Townhome types include row houses, semi-attached (houses sharing at least one wall), attached (houses sharing at least two walls), and in some instances, fully detached. 

Example: In high-density neighborhoods in Brooklyn and other New York City boroughs, some townhomes are rowhouses, as units line the block with neighbors sharing at least one wall. But over on Long Island, you’ll find more private suburban townhome communities led by an HOA.  

Condos

When someone purchases a condo, they technically own the “airspace” and interior of their unit, but not the actual building or land. Condos may consist of one or more floors, are maintained by an HOA, and come in all kinds of architectural styles and sizes (such as a high-rise, where neighbors may reside to the right, left, above, and below each other). 

Example: In Monsey and Spring Valley, New York, some condominium projects consist of two townhomes attached in the middle. They look and feel very much like semi-attached townhomes, but are technically condos, as residents own their individual units (not the land). 

PUDs

A Planned Unit Development or PUD is similar to condos and townhomes, except in these communities, buyers actually own their structure and land under a “Master Plan.” Residents pay an HOA fee to cover roadwork and shared amenities, but are given much more freedom to design, decorate, and landscape their properties. 

Example: In Lakewood and surrounding areas in New Jersey, many investors are choosing to develop townhomes as part of a PUD. Residents own their structure and the land on which it sits, but still pay HOA fees and enjoy shared community amenities. 

Why the townhome resurgence? 

While this building type has been popular for centuries, the American Northeast has seen a significant uptick in townhome construction and overall interest in recent years. 

According to BuilderOnline, townhomes made up about 13% of all single-family construction starts in 2022. The number is expected to hit 15% this year, which will surpass the record of 14.6% set in 2008 amidst the great housing and financial crisis. 

According to Everest Loan Officer Rebecca Jacob, buyers’ newfound interest in townhomes is no surprise given today’s high interest rates. 

“From a mortgage standpoint, there are no major differences when purchasing a townhome,” she explains. “But townhomes do have some advantages to homebuyers, especially first-timers. The most important one is that townhomes are affordable. The price per square foot in a townhome is oftentimes significantly cheaper than that of a single-family residence.” 

We’re also seeing more townhomes being built, as investors tend to get more bang for their buck compared to single-family homes and apartment buildings. This is because townhome units can be “up and running” much faster than apartments. As long as builders secure a Certificate of Occupancy (CO), individual townhome units can hit the market piecemeal (as opposed to waiting for the entire project to be finished).   

What are some benefits to buying a townhome? 

In addition to cost, Rebecca emphasizes key advantages to the townhome lifestyle. 

She says, “Another important pro is the shared amenities and HOA (if the townhome has an association). Having an HOA takes a huge load off of the homeowner when it comes to general upkeep and outdoor maintenance. This is very helpful to first-time homeowners who struggle to transition into all the responsibilities of owning a home. Think: snow removal, landscaping, roof maintenance, gutter cleaning, etc.” 

Other benefits include the more flexible space townhomes offer compared to multifamily apartments, which can be cramped. Owners enjoy more privacy, and if the community is gated, greater safety and security. 

Townhomes also offer excellent rent potential. For instance, homeowners might purchase a two-family townhome, live on one side, and rent the other to a tenant, thereby reducing their monthly mortgage payment. 

Likewise, some people prefer a townhome configuration because they can live close to extended family, such as elderly parents or grandparents. 

Are there any tips for townhome buyers? 

Mrs. Jacob offers some very sound pointers for those shopping the townhome market. 

“Be sure to ask what the HOA dues are. Buyers often get excited about the reasonable price of the home and/or the low taxes, only to discover that the steep HOA dues make the payment unaffordable.” Of course, this is a consideration your Everest Loan Officer will likely bring up during the loan process. 

Rebecca adds, “You will also want to speak to us before signing a contract to make sure the community in which you are buying is an approved project with Fannie/Freddie or HUD for FHA. This is something we can look up quickly and will save a lot of headache later on.”

Whether it’s a newlywed couple just starting out or remote workers looking for more space, there’s no doubt—the townhome is an attractive option. Check out some listings on your house hunting journey, and let us know how it goes! 

Everest says: Townhomes are the talk of the town

New York and New Jersey’s Premier 

Mortgage Brokerage for Townhome Buyers

Shopping beyond the single family? 

Everest has the lowdown on today’s hottest housing types.