NAHB’s analysis of Census Data from the Quarterly Starts and Completions by Purpose and Design survey indicates custom home building performed better than the overall building market during the challenging second quarter of 2020. This relative outperformance is at odds with the conventional narrative that spec home building saw outsized gains during the April to June time period.

There were 45,000 total custom building starts during the second quarter of 2020. While this marks a 6% decline relative to the second quarter 2019 total of 48,000, this decline was smaller than the overall decline for single-family housing starts of almost 11%. Over the last four quarters, custom housing starts totaled 177,000, which was a 5% increase over the prior four quarter total of 168,000 starts.

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%, down from a cycle high of 31.5% set during the second quarter of 2009. However, due to the construction volume of the second quarter, the quarterly market share increased to 21%. It worth noting that the custom building share also increased in the wake of the Great Recession, and that custom builds are more likely to occur in low density markets.

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.—