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) set a post-recession high for construction starts during the third quarter of 2016. There were 49,000 total custom starts for the quarter, compared to 47,000 for the third quarter of 2015.
Over the course of the last four quarters, there were 169,000 total custom single-family home starts, an increase of almost 8% over the prior four quarters. 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 22%, 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 2015 data.
I am a custom home builder in Toronto, Ontario, Canada and I also find a slight increase in business in recent years. The average construction cost per sq.ft. has decreased by about 10% compared to that of about five years ago. This can be attributed to the use of cheaper imported components, tools and materials and also to a lower markup by builders due to fierce competition.