Custom Home Building Market Growth Slows

May 19, 2017 LBM Journal

NAHB’s analysis of Census Data from the Quarterly Starts and Completions by Purpose and Design survey indicates a slowing of the growth rate for the custom home building market.

Over the last four quarter period, ending with the first quarter of 2017, there were 168,000 total custom single-family home starts, an increase of almost 2% over the previous four quarters. Custom building starts (not for sale, owner-built and contractor-built homes) totaled 31,000 during the first quarter of 2017. 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 21%, 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.

Source: NAHB

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