NAHB’s analysis of Census Data from the Quarterly Starts and Completions by Purpose and Design survey indicates custom home building gained market share during recent quarters but experienced a notable drop for construction starts at the beginning of 2023.
There were 36,000 total custom building starts during the first quarter of the year. This marks a 22% decline compared to the first quarter of 2022, matching weakness experienced throughout the home building sector. Over the last four quarters, custom housing starts totaled a solid 204,000 homes, a flat reading compared to the prior four quarter total (205,000).
After market share declines due to a rise in spec building in the wake of the pandemic, the market share for custom homes has increased. As measured on a one-year moving average, the market share of custom home building, in terms of total single-family starts, has increased to 21%. However, this is down from a prior cycle peak of 31.5% set during the second quarter of 2009.
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.