Townhouse Construction and the Great Recession

One of the impacts of the Great Recession was an interruption of the long-term growth trend in the construction of townhouses (attached single-family units) as a share of all single-family homes built. From 1990 to 2007, the share of townhouses constructed grew from 6% to 16% of single-family housing starts, as reported by the Census Bureau.

As of the first quarter of 2011, townhouse starts neared the record low (set in the first quarter of 2009), standing at a 9,000 non-seasonally adjusted starts rate. This is a decline of 87% from the peak rate of construction set in the second quarter of 2005.

This impact is perhaps unsurprising given the drags that exist on housing demand today, most importantly tighter lending requirements and high jobless rates that are holding back first-time homebuyers, who are more likely to purchase attached single family homes. Nonetheless, we expect the share of townhouses constructed to continue its long-term growth trend, as homebuyers of the future seek higher density, inner suburb locations and somewhat smaller homes.