Year-over-Year Gains for Custom Home Building

NAHB’s analysis of Census Data from the Quarterly Starts and Completions by Purpose and Design survey indicates that the number of custom home building starts (homes built on an owner’s land, with either the owner or a builder acting as the general contractor) posted a slight increase on a year-over year basis as of the second quarter of 2015.

Over the last four quarters, there were 158,000 construction starts of custom homes, compared to 146,000 for the four quarters prior that began with the third quarter of 2013.

Note that this definition of custom home building does not include homes intended for sale, so this analysis uses a narrow definition of the sector.

As measured on a one-year moving average, the market share of custom home building in terms of total single-family starts is now 23.1%, down from a cycle high of 31.5% set during the second quarter of 2009.

custom_2q15

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. As housing production slowed in 2006 and 2007, the market 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.

The market share for custom home building will likely experience ups and downs in the quarters ahead as the overall single-family construction market expands. Recent declines in market share are due to acceleration in overall single-family construction.

For a look at the geography of custom home building, read this recent update.



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