The real estate market is shifting, and one of the most compelling opportunities emerging for developers and investors is the Build-to-Rent (BTR) townhome sector—particularly in markets where homeowners have the highest equity. The latest 2024 U.S. Home Equity & Underwater Report by ATTOM highlights a critical trend: homeowners in states like Vermont, New Hampshire, Maine, Rhode Island, and Montana hold a massive amount of home equity, yet many are staying put due to high interest rates and affordability concerns.

This phenomenon, known as the “lock-in effect,” presents a prime investment opportunity for BTR developers to step in and provide a new housing alternative that caters to this group—offering the lifestyle and amenities of homeownership without the mortgage burden.

High-Equity Homeowners: A Market Ready for BTR Expansion

The states with the highest share of equity-rich homeowners include:

• Vermont – 86.7% of homeowners are equity-rich

• New Hampshire – 61.4%

• Maine – 61.1%

• Rhode Island – 60.8%

• Montana – 60.1%

Many of these homeowners have seen their equity grow to six figures, but interest rates near 7% are making them hesitant to buy new homes, even if they want more space or different living arrangements. This has created an increasing demand for high-end rentals, where individuals and families can maintain a homeowner-style lifestyle while avoiding the financial commitment of purchasing at today’s rates.

The Case for Build-to-Rent Townhomes in These Markets

Given the economic and real estate trends impacting high-equity homeowners, there is a strong case for BTR townhomes as a strategic investment in these equity-rich markets. Here’s why:

1. Homeowners Want Flexibility Without Giving Up Space

Many homeowners in these states don’t want to be tied down by a mortgage but still want the privacy, square footage, and community feel that townhomes provide. BTR townhomes give them a single-family experience without long-term financial obligations.

2. The Lock-In Effect Is Keeping Homeowners Out of the Market

With 50% of homeowners holding a mortgage rate below 4%, very few are willing to sell and take on a 6.8%+ rate for a new purchase. However, this doesn’t mean they don’t want to move—many are seeking lifestyle upgrades but are unwilling to sacrifice their existing low-cost financing. BTR townhomes offer an attractive alternative where they can move without giving up financial advantages.

3. Rising Home Values Make Buying Less Appealing

Since 2019, median home prices have increased 38.4%, while the cost per square foot has surged 54.9%. High-equity homeowners may be able to afford to buy, but many are realizing that purchasing doesn’t always equate to a better home or lifestyle. High-end rental townhomes give them access to modern amenities, luxury finishes, and prime locations—without overpaying for an inflated market.

4. HELOCs and Home Equity Loans Show Demand for Capital Liquidity

The Federal Reserve reports that HELOC balances have increased 20% since 2021, and home equity lending has reached its highest level since 2008. This signals that many homeowners are leveraging their equity for financial flexibility rather than moving. BTR townhomes provide a premium rental solution that allows these homeowners to use their capital for investments, business opportunities, or personal finance management—while still living in high-quality housing.

5. Shifting Life Stages Drive Demand for Luxury Rentals

Major life events—such as retirement, downsizing, or divorce—continue to fuel demand for high-end rental options. Many equity-rich homeowners in Vermont, New Hampshire, and Rhode Island are in their prime downsizing years but do not want to buy again in today’s market. Instead, they are seeking luxury rentals that offer modern amenities, maintenance-free living, and strategic locations near desirable urban centers or lifestyle hubs.

The Investor & Developer Advantage in BTR Townhomes

For investors and developers, targeting these equity-rich markets with high-end BTR townhome developments presents a lucrative opportunity:

• High-Income Tenants: These markets are filled with homeowners who have financial stability but want rental flexibility.

• Strong Demand, Limited Competition: Luxury townhome rentals remain an underserved market in many of these states.

• Long-Term Stability: Unlike transient apartment renters, BTR tenants stay longer, ensuring stable cash flow.

As Daniel Kaufman puts it:

“Real estate cycles always create opportunities, and right now, equity-rich homeowners are fueling a new demand for high-end rental living. Developers who recognize this shift and build for it will be ahead of the curve.”

Conclusion: Seizing the BTR Opportunity in High-Equity Markets

The data is clear: high-equity homeowners are seeking new lifestyle options, but high interest rates and price appreciation are keeping them from buying. This creates an ideal scenario for BTR townhome developments—offering them the space, quality, and amenities they want without the financial constraints of homeownership.

For real estate investors and developers, this is a moment to capitalize on shifting homeowner behaviors by creating premium BTR communities in states with the wealthiest homeowners. The demand is here—the question is, who will build to meet it?

About Daniel Kaufman

Daniel Kaufman is a seasoned real estate investor, developer, and market strategist known for identifying trends before they hit the mainstream. His expertise in market cycles and investment strategy helps developers and investors navigate shifts in the real estate landscape. Learn more at Daniel Kaufman Real Estate.

Contact

🌐 Website: https://www.danielkaufmanre.com

What’s your take on the BTR townhome opportunity? Let’s discuss in the comments!