Growth for Custom Home Building


The custom home building market experienced significant growth during 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, totaled 162,000 for 2014. This marks a growth rate of 20% from the 2013 total of 135,000.

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 is now 24.8%, down from a cycle high of 31.5% set during the second quarter of 2009. During 2012, 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 declined. However, over the last year the market share for custom home building has been rising in terms of counts of units and share.

custom building_4q14

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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