According to NAHB analysis of the most recent Census data of Starts and Completions by Purpose and Design, during the third quarter of 2022 single-family attached starts totaled 38,000, which is 12% higher than the third quarter of 2021. Over the last four quarters, townhouse construction starts totaled 152,000 units, 7% higher than the prior four quarter total (142,000). However, these counts will soften in the quarters ahead as the overall building market slows.
Using a one-year moving average, the market share of newly-built townhouses increased to 14% of all single-family starts. As denser areas reopened following covid later, the townhouse market rebounded later. Moreover, as the spec single-family building market slows on higher interest rates, the townhouse construction market share will rise.
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%, on a one-year moving average basis, of total single-family construction. This high point was set after a fairly consistent increase in the share beginning in the early 1990s. We are likely to see a new peak market share in the quarters ahead.
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. This will be particularly true for prospective first-time buyers in high cost metro areas once the Fed pulls back on the current tightening cycle.