NAHB’s analysis of Census Data from the Quarterly Starts and Completions by Purpose and Design survey indicates custom home building remain flat.
There were 50,000 total custom starts for the second quarter of 2018. This was effectively unchanged relative to the second quarter of 2017. Over the last four quarters, ending with the second quarter of 2018, custom housing starts totaled 172,000. This was a 0.6% gain 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 19%, 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, especially in spec home building.
For a look at the geography of custom home building, read this recent review of 2016 annual data.