According to NAHB analysis of the most recent Census data of Starts and Completions by Purpose and Design, townhouse construction expanded to a 2.5 year high during the final quarter of 2020. As housing demand has shifted to more suburban and exurban areas and housing affordability headwinds persist, medium-density construction initially lagged. However, a strong final quarter led to roughly flat 2020 total volume.
During the fourth quarter of 2020, single-family attached starts totaled 34,000, which was 36% higher than the fourth quarter of 2019 (25,000). Over the last four quarters, townhouse construction starts totaled 113,000 units, 3% higher than the prior four quarter total (110,000).
Using a one-year moving average, the market share of new townhouses increased to 11.4% of all single-family starts.
The peak market share of the last two decades for townhouse construction was set during the first quarter of 2008, when the percentage reached 14.6% of total single-family construction. This high point was set after a fairly consistent increase in the share beginning in the early 1990s.
Over the near-term, townhouse construction is likely to lag the overall building market, as telecommuting allows people to live further from urban cores in less dense neighborhoods.
However, the long-run prospects for townhouse construction remain positive given growing numbers of homebuyers looking for medium-density residential neighborhoods, such as urban villages that offer walkable environments and other amenities, while seeking to avoid high-density communities that depend on mass transit and elevators in the wake of the virus-related lockdowns of the spring of 2020.