Richard Stein – Realtor®, Douglas Elliman, GREEN, SFR, CBR, eCertified®

Local Agent, Worldwide Marketing – Douglas Elliman Real Estate formerly Prudential Douglas Elliman Real Estate

Builders Bet on Luxe Townhomes to Win Over Young Buyers

Builders across the country are betting on luxury townhomes to try to get more young adults into homeownership. Open floor plans, high ceilings, and upgraded amenities are features they hope will lure millennials to buy their first home.

Builders betting on townhomes for young buyers

© Luxy Images – Luxy/Getty Images

“When a lot of people think of townhouses, they think of these very narrow homes because the floors are stacked on top of one another,” Felix Bravo, a sales executive with Pordes Residential in Miami, told Forbes.com. He is selling townhomes up to 3,000 square feet starting at $900,000. “With the amount of space we have, they have a very open feel.” The amenities include a private rooftop terrace with a jacuzzi and outdoor kitchen.

“The wow factor is how much space they have and how luxurious the interior is in terms of appliances, cabinetry, and the kitchen island,” says Bravo. “The second biggest wow factor is being able to go up to your own private rooftop and hop into your private jacuzzi. It makes you feel like you’re worth a million bucks.”

Builders hope that such luxurious townhomes will attract more young adults to consider buying one.

“There are plenty of examples of townhouses being built as luxury homes,” Robert Dietz, chief economist for the National Association of Home Builders, told Forbes.com. “You’ve got your four-story townhouses, particularly in high-cost metro areas.”

A townhome can offer a “suburban-type feel” while also adding in some walkability to a neighborhood—two features that millennials say they desire in a home, Dietz says. Single-family attached townhouses provide a higher density and, therefore, more opportunities for retail and commercial around it that is walkable, Dietz says.

Since 2009, new townhome construction has been increasing. Townhouse starts were 24 percent higher in the third quarter of 2018 than the previous four quarters, according to NAHB data. The market share of townhouses is currently at about 14 percent of single-family home construction, which marks a post-recession high.

Dietz predicts over the next five years that the townhome market share will continue to rise and reach about 20 percent.

Why 400,000 Young Adults Aren’t Buying

High student loan debt is one main culprit for the lower rate of homeownership over the past decade, a new study from the Federal Reserve shows.

Why young adults aren't buying

© Fertnig – E+/Getty Images

Homeownership of all Americans has fallen 4 percentage points from its peak of 69 percent in 2005. It has dropped the most—from 45 percent to 36 percent—among those 24 to 32 years old.

“In surveys, young adults commonly report that their student loan debts are preventing them from buying a home,” Fed researchers Alvaro Mezza, Daniel Ringo, and Kamila Sommer write in the paper. “Our estimates suggest that increases in student loan debt are an important factor in explaining their lowered homeownership rates, but not the central cause of the decline.”

The Fed’s paper did not identify the other causes for the decline in the homeownership rate among younger adults. Researchers attributed about 20 percent of the drop in the rate to high student loans.

Every increase of $1,000 in debt contributed to a 1- to 2-percentage-point drop in homeownership, the study finds. Researchers note that this equates to about 400,000 people who otherwise would have expected to own homes but have not because of their student loan debt.

“This finding has implications well beyond homeownership, as credit scores impact consumers’ access to and cost of nearly all kinds of credit, including auto loans and credit cards,” the researchers noted in the report. “While investing in postsecondary education continues to yield, on average, positive and substantial returns, burdensome student loan debt levels may be lessening these benefits.”

The National Association of REALTORS® has also conducted studies showing the impact student debt is having on delaying homeownership. A 2017 NAR study found that student debt delayed homeownership by about seven years. It also had an impact on the rest of young adults’ lives, such as holding millennials back from making financial decisions and reaching personal milestones, such as changing careers, continuing their education, marrying, or even having children.

Natural Disasters Hit Real Estate Hard in 2018

Natural disasters struck the United States with a vengeance in 2018, as floods, wildfires, and hurricanes damaged thousands of homes and businesses. Eleven events in 2018—the third year in a row with an above-average number of catastrophes—led to $11 billion or more in residential and commercial losses, according to the newly released Natural Hazard Report from CoreLogic.

Road damaged by flood

© Howard County Government/Getty Images

“In 2018, the U.S. continued to experience damaging weather and natural catastrophes in high exposure areas, and in some instances, in regions that had been impacted in less than a year prior,” says Howard Botts, chief scientist at CoreLogic. “Hazards will always pose a threat to homes and businesses and knowing exactly what that risk entails is critical in helping ensure sufficient protection from the financial catastrophes that so often follow natural disasters.”

In 2018, there were more than 1,600 significant flood events in the U.S. Residential and commercial flood damage in North Carolina, South Carolina, and Virginia from Hurricane Florence caused up to $28.5 billion in damages. Eighty-five percent of the residential flooding losses were not covered by insurance, the report showed. Texas, Maryland, and Wisconsin also saw 1,000-year floods last year, with some in areas that had experienced 1,000-year floods less than two years before.

Nationwide, 6 percent of properties are within the Special Flood Hazard Areas. But only about one-third of those properties have flood insurance policies.

In 2018, the Atlantic hurricane season had 15 named storms, including eight that became hurricanes. Hurricane Florence (Category 1) and Michael (Category 4) caused massive damage when they struck the U.S. About 700,000 residential and commercial properties saw catastrophic flooding and wind damage from Hurricane Florence. Michael struck the Florida Panhandle and caused up to $4 billion in residential and commercial insured losses from the wind and storm surge, according to CoreLogic’s report.

Unprecedented wildfires also wiped out real estate in 2018. “The number of acres that burned in 2018 is the eighth highest in U.S. history,” as reported through Nov. 30, 2018, according to CoreLogic. Eleven western states saw at least one wildfire that burned more than 50,000 acres. California and Oregon saw the most.

Northern California’s Camp Fire in November 2018 turned nearly the entire city of Paradise into ash. More than 18,000 homes and businesses were damaged. The Woolsey wildfire in Malibu destroyed more than 1,600 structures. These two wildfires alone caused up to $19 billion in total insured and uninsured losses, CoreLogic estimates.

Source: 
2018 Natural Hazard Report,” CoreLogic 

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