Dennis Riordan, senior vice president for the Artery Organization Inc., still remembers the shock he felt almost a year ago when he discovered that 15 to 20 people, mostly first-time home buyers, had camped out in sleeping bags outside the company's sales office at Greens of Patuxent, a new villa town house community in Laurel, to wait for the project's opening.

But then it happened again when the company opened a new section of villas -- town houses that are attached to other units on three sides with no back yards. Now, Riordan says that even though the sight of people waiting at an opening still surprises him, he almost expects it.

"Every time we released a section, we had a group of people waiting," he said.

Artery's experience reflects a growing interest in villa town houses as soaring land costs and rising interest rates have sent new home prices skyrocketing beyond the reach of many people, particularly first-time home buyers.

Dick Connor, technical services director for the Suburban Maryland Building Industry Association, said that lots for single-family homes cost an average of 40 percent more this year than they did in 1986, while town house lots have increased in price by 20 percent in a year.

Single-family home lots now cost as much as $40 a square foot, while land for town houses runs $30 a square foot in many parts of suburban Maryland. In Virginia, land prices in some areas have increased 60 to 80 percent in a year's time, Connor said. Land costs used to account for only a fourth of a home's price, but now they make up as much as one-third, he said.

But villa town houses enable builders to squeeze more houses onto the same amount of land than traditional town houses would occupy. Consequently, builders are able to divide land costs among more units, save on construction costs and offer villa town houses for $5,000 to $20,000 less than a comparable full-size town house with a back yard.

As a result, villa town homes, which first appeared in the Washington area in the early 1970s, are capturing a slightly greater share of the new home market, especially among first-time home buyers, who, because of rising interest rates and prices, are not able to afford higher monthly mortgage payments.

Bob Pearson, a division manager for Ryland Homes Inc., which is building villa town homes in Gaithersburg and Germantown, said that "anytime you can increase density, you end up with lower land costs {per unit}." That "enables us to sell the product for less," he said.

Al Veirs, vice president of commercial development for Kettler & Scott Inc., another home builder, estimated that builders can possibly double the number of units per acre.

"For normal town houses, you can get eight to 12 units on an acre. With back-to-back, you can get 14 to 16," Veirs said.

Villa town houses also cost less to build. George Daily, senior vice president of Curtis Peterson Inc., which also builds villas, said that builders often save on construction costs because they only need to lay one foundation for back-to-back houses, which typically don't have basements and are built on slabs.

But Frank Bond, senior vice president of Kettler Bros. Inc., which is building a subdivision of villas in Gaithersburg's Montgomery Village, said that the construction savings aren't nearly as much as the savings for land.

Overall, Daily said, builders save about $10 a square foot on villas compared with regular town houses.

As a result, builders can offer the homes, which typically range in size from 1,100 to 1,700 square feet, for far less than they sell town houses with back yards. Pearson, for instance, said that prices for Ryland's villas generally start in the low $80,000s in Gaithersburg while full-sized town houses in the same development cost in the upper $90,000s.

Villas, which accounted for 5 percent of the new town house market for the first six months in 1986, made up 6 percent of the market during the same period this year, according to Ana Pitheon, research director for Housing Data Reports, a new homes marketing and research firm.

Many villa buyers are young professionals who cannot afford to buy larger units, said Patricia Thompson, marketing vice president for Kettler & Scott. Said Veirs, "It's a happy medium for those who want a home, but not a condominium."

Thompson said that people buy villas to build equity and then sell them a few years later to move to a larger house.

Thompson said the absence of a back yard limits the market for villas as resales, but the units would still appeal to first-time home buyers.

"It's like having a swimming pool in the back yard. There are some people who want a swimming pool and some who don't. The same applies to back yards," Thompson said, noting that some buyers prefer not having to do much yard work.