Residential construction has been famously slow for several years and some new analysis of Census data by the National Association of Home Builders (NAHB) shows that the lack of robustness is shared in the custom home sector.  In an Eye-on-Housing blog article, Robert Dietz, NAHB Senior Vice President and Chief Economist says custom home building has been effectively flat over recent quarters.

In the second quarter of this year the Census Bureau recorded a total of 49,000 custom home starts, a tiny decline from 50,000 in the second quarter of 2018.  Dietz says the last four quarters, custom housing starts totaled 169,000, down 1.7 percent compared to the prior four quarters (172,000). 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 20 percent, down from a cycle high of 31.5 percent set during the second quarter of 2009.

Dietz says that prior to the housing crisis there had been a 15-year long trend away from custom homes as defined by houses built on the eventual owner's land.  When that shifted starting in 2006 it wasn't that the number of custom homes increased as it was the total number of single-family housing starts fell when the credit crunch made it difficult to obtain acquisition, development, and construction credit to build on spec.

Dietz says the custom-building market is likely to remain relatively flat given improved availability of inventory at the higher end of the housing market.