Custom and Spec Home Market Shares in 2016

NAHB’s analysis of the most recent Census Bureau’s Survey of Construction (SOC) shows that custom home building registered declining market shares across most US regions in 2016. The sharpest drop in the custom home share of new single-family starts took place in the East South Central division, from 35% to 27%. The two exceptions are the Mountain and Pacific divisions where custom home building is traditionally less common. In the Mountain division, the custom home share of new single-family starts was lowest in the nation but remained stable (14%). The Pacific division was the only US division registering an increase in the custom home share (from 14% to 18%). Meanwhile, the East South Central and New England registered significant increases in single family homes started for rent, with the share of starts for rent more than doubling to 13% and 10%, respectively.

Nationally, the custom home market share declined to 21% – well below the 2008-2011 levels when the credit crunch has limited builders’ access to Acquisition, Development, and Construction (AD&C) loans and shifted production towards home building on owner’s land.

While nationally about one in five homes started in 2016 was a custom home, the shares varied widely across the US divisions. The New England and East North Central divisions stand out for registering the highest shares of starts supervised by contractors or owners – close to 39%. The Middle Atlantic division is next with the share of new homes started on owners’ land close to 32%. In the East South Central division, more than a quarter (27%) of new single-family homes started in 2015 was built on owners’ land.

At the opposite end of the spectrum are the Western divisions – Mountain and Pacific – and the South Atlantic. Home building here is dominated by spec starts. These divisions registered the highest three spec home shares – 83% in the Mountain and South Atlantic, and 79% in the Pacific. In comparison, in New England and the East North Central division, homes built for sale accounted for just over the half of all new single-family starts, 51% and 54%, respectively.
The East South Central and New England registered significant increases in single family homes started for rent, with the share of starts for rent more than doubling to 13% and 10%, respectively. The West North Central division that traditionally stands out for having a high share of starts for rent maintained its reputation with a share rising to 10%, twice as high as the national average of 5%.

According to the SOC definitions, homes built for sale, or spec houses, are houses built on builder’s land with the intention of selling the house and land in one transaction. Contractor-built or owner-built houses – that together make up the custom home market – are built for owner occupancy on owner’s land with either the owner or a builder acting as the general contractor.



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