NAHB’s analysis of Census Data from the Quarterly Starts and Completions by Purpose and Design survey indicates custom home building expanded during the third quarter of 2022 despite broader market weakness. There were 59,000 total custom building starts during the third quarter of the year. This marks a 5% increase compared to the third quarter of 2021 in terms of year-over-year change.
Over the last four quarters, custom housing starts totaled 207,000 units, a 9% gain from the prior four-quarter total. Custom construction likely benefitted from improved supply-chains, a reduction in the growth rate of the cost of building materials and a stock market rally that helped the higher end of the market.
After market share declines due to a rise in spec building, the market share for custom homes has increased post-covid. As measured on a one-year moving average, the market share of custom home building, in terms of total single-family starts, increased to 19%. This is down from a cycle high of 31.5% set during the second quarter of 2009. However, it is worth noting that this submarket tends to gain market share during periods of housing market weakness as it is relatively more stable with respect to demand and less interest-rate sensitive.
Note that this definition of custom home building does not include homes intended for sale, so the analysis in this post uses a narrow definition of the sector. It represents home construction undertaken on a contract basis for which the builder does not hold tax basis in the structure during construction. Typically, the owner already owns the building lot.