Booming Homes – But Why? | Construction Magazine

Matami Homes at Harmony in Lakewood Ranch, a master planned community in Sarasota County, Florida.

Residential home construction has gone up in the past year or so. According to the latest figures, residential homes now make up nearly 13% of all single-family starts and have had a 38% increase in just one year.

And if you ask most experts, this trend will only continue as 2022 continues.

As NAHB Chief Economist Rob Dietz explains, “NAHB expects townhouse construction to rise from 13% to above 15% of all single-family homes in the coming years.”

If this prediction is correct, it will mark a record for city home construction, surpassing its previous 2008 peak of 14.6%.

It sounds like a bold prediction, but the conditions are set for country houses to thrive. Scott Hawley, managing director of Kaplan Residential, expects similar numbers by early this year.

“It’s no secret that townhouse construction has been its most successful year in 2021, and I wouldn’t be surprised if 2022 beats last year’s metrics,” says Hawley, whose company focused on building rental homes about five years ago. “The others are following.”

Impact of price hike

Hawley is right: Other builders are definitely jumping on the bandwagon — and for good reason. For example, cottages provide more bang for the buck for the rest of the build, especially with rising timber and material prices and inflation to worry about.

“The profit on the project increases with the intensity,” says Brian Lawrence, who has seen a slight increase in home finance requests while serving as Vice President and Relationship Manager at Univest Bank and Trust Co.

The ability to build and operate homes faster than other rental housing options is also an important factor.

“Townhouses for rent start making money much faster than traditional apartments, which makes them less risky,” Hawley says. “While building a rental community townhouse, the property management company can begin to rent out a row of five units as soon as that row receives a Certificate of Occupancy (CO). This is very different from traditional apartments where the property management company has to wait for CO2 in a building of 100 units to start leasing.”

Finally, there are market conditions to consider – particularly the very high prices of traditional single-family detached homes.

According to, the median home price in 2021 ended up at $375,000 — a whopping 25% increase since 2019. These high prices, along with rising mortgage rates, are undermining affordability and driving many buyers out. from the market. Residential homes are often the ideal low-cost alternative for those marginalized consumers.

“House prices are up across the board,” Lawrence says. “Condominiums are becoming the main start-up in most markets. With inflation and rising house costs, all the existing supply has been purchased from single family homes. It is a seller’s market, and developers are rushing to finish projects to meet the high demand for homes.”

Accepting the request

That’s right – the demand for these properties is strong, but it’s not just the high cost of detached homes that drives them. Some consumers, often driven by the pandemic, simply want more space than basic apartment rental offerings. Others, such as those with remote working options, feel more mobile, and look to more pleasant, often coastal markets, with a plethora of amenities and walkable layouts.

Lakewood Ranch, a planned community in Sarasota County, Florida, is one such destination. The community houses both townhouses and detached single family homes, as well as shopping, dining, and a myriad of clubs, activities, and events.

“More than 50% of our buyers come from out of state,” says Laura Cole, vice president of Lakewood Ranch Communities. “For those looking for low-maintenance homes close to amenities, this is an attractive option. We see everything from empty nesters and retirees to young couples and families in these homes.”

As Cole hints, the growing interest from the baby boomer generation, who often look to take advantage of today’s increasing home values ​​and downsize into something smaller and easier to manage, also plays a role.

“By 2030, 1 in 5 Americans will be over the age of 65,” says Daniel Parulik, director of Opticos Design and author of “Missing Middle Housing: Thinking Big and Building Small Responding to Today’s Housing Crisis.” You want any maintenance, you want to be close to the action, you want to be able to close and leave.”

Barriers along the way

Despite the high demand and significant market opportunity, builders still face a lot of challenges when trying to capitalize on this burgeoning trend in the city home.

Most commonly, there are zoning issues that must be overcome. As Alex Tetterton, President and CEO of Southvine Homes, said, “We haven’t seen an easy deal of any kind in some time.”

Southvine was recently forced to request a reorganization to move forward with the Riversong Project, a 51-unit cottage development in Duluth, Georgia. Although her application has since been approved, Tetterton says this conflict is something developers should consider when planning future projects.

“It’s very difficult to get around zoning adjustments,” Tetterton says. “Anytime a builder or developer tries to re-divide a property into more intensive use – even if a future land use plan requires it, there are always going to be issues. Spending a lot of time doing front-end due diligence, all the way through Final zoning with the local municipality and zoning staff, is critical.”

As with other construction projects, supply chain issues and supply costs are also an issue, as is finding a lot to build on.

However, if the builders are able to deliver, the market is ready to snap them up.

“The high delivery costs of single-family homes have made it nearly impossible in most markets to deliver them at attainable price points, especially for entry-level buyers,” Parolek says. “The industry will need to introduce more townhouses and other missing medium types to reach accessibility thresholds.”

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