Sunday, November 25, 2007

A glut of townhomes?

Is there an oversupply of townhomes in West Seattle? It depends upon your point of view.

What constitutes an oversupply? Certainly, there are a large number of new construction condos and townhomes coming on the market. In the past several years, developers have been buying land in the less-expensive parts of town to build multi-family housing. These units tend to be more affordable than single-family homes, allowing many first-time buyers to own a home sooner than they might otherwise have been able. In essence, condos and townhomes have become the new "starter homes" for many people.

Unfortunately for the developers, the lag time between buying the land and finishing construction hasn't timed out as well as they would have liked. The result is that there is quite of bit of this inventory on the market, but not so many buyers at the moment.

On the positive side (for buyers), this means that buyers may be able to purchase brand new units for thousands of dollars less than just a few months ago. On the other hand, the rate of appreciation on the investment in a townhome may not be as great as for a single-family residence. Keep in mind, however, that real estate is meant to be a long-term investment, not a source for quick cash (that's why "flipping" is such a risky endeavor). AND the rate of appreciation for real estate in Seattle is still incredibly strong -- over 8% last year. So if you bought a townhome recently, or are considering buying one, you are still likely to realize a significant return on your investment if you plan to own it for several years. Another advantage to buying a townhome is that when you are ready to "move up" to something larger, you may be able to keep the townhome as a rental.

What do you think? Is a townhome a good investment right now?

The following link is to a related article in the Seattle P-I.

No comments: