IIRC, there's considerable difference based around relative wealth, and many less well-off hobbits lived in above ground homes. Most of the principal hobbits in LOTR (except Sam, I think) lived in large underground mansions, but they were rather well-off hobbits.
Even so, the construction approach here (digging a partial hole, building a frame that extends somewhat above the original ground level, and then taking the dirt from the whole and covering the structure) seems a fairly practical method of building what ends up being an underground home, and the result is visually similar to the art that has accompanied various editions of the books (and the look used in the movies) for hobbit homes, so it seems pretty reasonable.
This is always how I've imagined my dream house to be. Energy efficient, immersed in nature, easy to hide if necessary.