Custom Home Building Grows During the Second Quarter

Custom home building recorded growth during the second quarter of 2014.

NAHB’s analysis of Census Data from the Quarterly Starts and Completions by Purpose and Design survey indicates that the number of starts of homes built on an owner’s land, with either the owner or a builder acting as the general contractor, rose from 39,000 for the second quarter of 2013 to 48,000 for the second quarter of 2014.

In recent years, as the rest of the single-family construction market expanded, the market share (as a percentage of total single-family starts) of owner and contractor built housing has fallen. Note that this definition of custom home building does not include homes intended for sale, so this is a narrow definition of this sector.

As measured on a one-year moving average, the market share is now 23.1%, down from a cycle high of 31.5% set during the second quarter of 2009. However, the market share for custom home building has posted gains for the last two quarters.

custom HB_2q14

The onset of the housing crisis and the Great Recession interrupted a 15-year long trend away from homes built on the eventual owner’s land. However, as housing production slowed in 2006 and 2007, the share of this not-for-sale new housing increased as the number of starts declined. The share increased because the credit crunch made it more difficult for builders to obtain AD&C credit, thus producing relatively greater production declines of for-sale single-family housing.

 



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