Market Share of Custom Home Construction Holding Firm
In a recent entry in NAHB's Eye on Housing blog, economists examined the market share of non-spec home building, and particularly custom home building, which increased as housing production slowed in 2006 and 2007. This not-for sale single-family housing construction is classified in Census housing starts data as either owner or contractor-built. Economists explain that, as the credit crunch made it more difficult for builders to obtain AD&C credit and more difficult for buyers to obtain mortgage financing, custom building gained ground because such construction does not require a sale of real estate from a builder to a home buyer.
Now that housing starts have been trending upward again, these experts wanted to know whether the share of single-family owner and contractor-built housing remains elevated - and apparently it does. However, that share is declining slowly as spec home building comes back in markets where home buyer demand is growing again. For the third quarter of 2012, Census data indicate that the number of owner or contractor-built housing starts was virtually unchanged at 37,000, placing the one-year moving average of the share of total single-family starts at 26%.
This is down somewhat from the cycle high of 31.5% set during the second quarter of 2009, with recent declines in market share driven by the overall increase in housing starts. Nonetheless, these data illustrate that custom home building played an important role during the depths of the Great Recession. While total spec housing starts fell by 85% from the second quarter of 2005 to the final quarter of 2010, the biggest decline experienced by custom home building was a smaller, but still significant, 68%.
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- Tags: ADI News
- Joanne Loftus