Share of Custom Homes on the Decline

Washington, DC, Oct. 13, 2014 -- New NAHB research reveals significant regional differences in the share of custom homes started in 2013.

The analysis of the 2013 Census Bureau’s Survey of Construction finds that the Northeast and East North Central parts of the nation have the highest market shares.

The survey differentiates between houses built for sale, houses built by contractors, owners and for rent. Built for sale, or spec houses, are houses built on builder's land with the intention of selling the house and land in one transaction. Contractor-built or owner-built houses – that together make up the custom home market – are built for owner occupancy on owner’s land with either the owner or a builder acting as the general contractor.

During the recent housing contraction, the share of spec starts declined from 79% in 2005 to less than 65% in 2010.

The trend finally reversed itself in 2011 and the share of spec starts reached 74% in 2013.

At the same time the share of custom homes increased from less than 20% in 2005 to 30% in 2009. It has been declining since then and went slightly below 22% in 2013.

Even though most homes started in 2013 are built for sale, the share varies widely across the U.S. The Western divisions are the hightest at 83% and 80%, respectively.

In the Northeast (New England and Middle Atlantic) and East North Central divisions, less than 60% of all single-family starts are homes built for sale.

The East South Central division stands out for having the highest share of homes started for rent, close to 10%, more than double the national average of 4%.