REALTOR® confidence about the outlook for townhomes in the next six months improved in many states, according to the January 2015 REALTORS® Confidence Index Survey. The REALTORS® Confidence Index-Six-Month Outlook crossed the threshold of 50 in many states.
Demand for townhomes is strong in states that are experiencing employment growth from the technology and oil/gas industries (e.g., California, Washington, North Dakota, Texas), the revival of manufacturing (e.g. Michigan), and demand from international clients (e.g., Florida). The growing interest for walkable” and “smart” neighborhoods may also be underpinning demand for townhomes and condominiums.
However, access to condominium financing remains an issue. REALTORS® continued to report that obtaining FHA unit financing for condominiums is difficult because many condominiums do not meet FHA eligibility criteria. Condominiums are frequently the entry point to homeownership for first-time homebuyers.
What Does This Mean For REALTORS®? Helping buyers find starter homes may be an increasing challenge given FHA requirements and increasing demand. REALTORS® will need to work more patiently with homebuyers and present a wider set of feasible alternatives.
 Condominium projects need to pass eligibility criteria to be FHA-approved that will enable borrowers to avail of an FHA mortgage. Among others, criteria relate to the area devoted for non-residential use (no more than 25 percent), ownership (no more than 10 percent ownership by a single entity), delinquency dues ( no more than 15 percent), use of facility (assisted living facility are generally not eligible), and rental pooling arrangements (not eligible). See http://portal.hud.gov/hudportal/documents/huddoc?id=11-22mlguide.pdf