NAHB’s analysis of Census Data from the Quarterly Starts and Completions by Purpose and Design survey indicates ongoing expansion of the volume of custom home building but slight declines in terms of overall market share.
Over the last four quarter period, ending with the third quarter of 2017, there were 173,000 total custom single-family home starts, an increase of more than 2% over the previous four quarters. Custom building starts (not for sale, owner-built and contractor-built homes) totaled 51,000 during the third quarter of 2017. Note that this definition of custom home building does not include homes intended for sale, so the 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 21%, down from a cycle high of 31.5% set during the second quarter of 2009.
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 single-family 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 an acceleration in overall single-family construction. For a look at the geography of custom home building, read this recent review of 2016 data.