Fewer Custom Homes Built in 2023

Fewer custom homes were built in 2023 than the year prior, according to recently published data from the Census Bureau’s Survey of Construction.  

The share of custom homes built reached 18.8% of total new single-family home starts in 2023, dropping from 20.4% in 2022. That is 177,850 custom homes built last year compared to 207,472 in 2022.

The dip confirms what custom builders have experienced in the last three years: a pick-up in demand followed by modest slowdowns. Still, compared to years prior, the 18.8% share reflects a stable percentage in comparison to the last six years.  

In the last 19 years, the share of new custom homes peaked at 30% of new single-family home starts in 2009. Since then, the average share of new custom homes is 25.5%, with the lowest share dropping to 17.6% in 2021.

Though the lower share in 2023 reflects a drop from 2022, it remains higher than 2021 and 2020.  

GRAPH COURTESY THE NATIONAL ASSOCIATION OF HOME BUILDERS

Positivity for Custom Building Ahead

The Census Bureau produces its Survey of Construction report once a year to reflect years prior, but its quarterly published statistics identify more timely data sets. The recent quarterly data found custom building thriving, reaching a nearly two-year peak.

The latest figures show a close to 6% year-over-year increase in custom home building starts during the second quarter of 2024. This accounts for 52,000 custom home starts but does not include spec builds.

It is a welcomed increase for custom home building, which has seen a decrease of 5% across the past four quarters of 2024 compared to the previous four quarters.

According to the National Association of Home Builders, custom buyers remain less sensitive to interest rate change, positioning the segment for more stability in the future.