April 27, 2019

Don’t overlook the townhome/condo market for value options


Buckle your seat belt...the spring home buying and selling season is shifting into high gear. Last week’s column was about the inventory squeeze, and like the number of rainy days we are seeing this spring, it is not letting up.  March’s new approved contracts set another record. They surpassed the number of new listing and closings on residential resales.

 Realtors® are monitoring a noteworthy market sub trend that hasn’t received much public attention. It is the increasing role of the townhome/condominium market.

Look at absorption rates for single-family resales and townhome/condo resales during the past 13 months, and you will see that the townhome/condo inventory was a higher rate than single-family homes. At the same time, townhome/condo sellers were getting a little better profit margin. The average sales price as a percentage of the listing price for townhomes/condos was one percent better than it was for single-family resales seven of the past 13 months.

According to Realtor Property Resource (RPR), the inventory of single-family homes for sale in the 11-county region monitored by the Northeast Tennessee Association of Realtors ® (NETAR) was being absorbed in the rate of 23 percent in March.  Absorption rates are not rocket science. They are an analytic that describes the monthly sales rate in relation to total inventory. In March single-family resales accounted for 23 percent of all the single-family listings. Last year it was 16 percent then jumped nine points in April as the selling and buying season heated up. The year before the March-April increase was four points.

 That is speedy, but it is a slow poke compared to the townhome/condominium market. The March absorption rate was 38 percent, which is a little more than twice what it was March last year. Last year’s March rate jumped from 16 percent to 34 percent in April. The year before the March-April increase was only five points. See the trend at work?

These analytics tells Realtors® that there is a subtle market preference undercurrent at work. It subtle because there are not nearly as many townhome/condo sales as single-family sales and the sales price is typically lower. They don’t attract as much attention as single-family sales.

Whether it is a generational preference driven by empty nesters transition to the next phase of their life or an economic situation that lowers the price burden for first-time buyers, the cause is not defined. In fact, it’s probably a combination of both.

No one expects the townhome/condo market to displace the local preference for single-family, detached homes. But it’s clear the market share is increasing and exerting more influence on the overall housing market – especially in the city markets.

This explanation of the townhome/condo market sub trend is just one example of how Realtors® look beyond the bigger monthly sales and average price numbers to explore options for buyers, sellers and investors. There is a lot more to the real estate market that putting a listing on the market, taking out some ads and negotiating a deal. It’s a complex universe, and even though the overall inventory is tight, there are opportunities for those who have partnered with a professional Realtor® who has the market knowledge and resources that gives them the edge to identify and capture opportunities in today’s complex and changing real estate marketplace.