Dive Brief:

• The number of custom home starts reached a post-recession high in the third quarter, increasing 4.3% to 49,000 starts year-over-year, albeit remaining flat with the prior quarter, according to an analysis of Census Bureau data by the National Association of Home Builders.

• The category includes homes built on an owner’s land with either the owner or a builder acting as the general contractor and does not include homes built for sale. The category posted 169,000 starts in the past four quarters, up 8% over the prior four quarters.

• However, custom homes’ share of total single-family starts fell to 22% in the third quarter on a one-year moving average from a cycle high of 31.5% in the second quarter of 2009.

Dive Insight:

While custom homebuilding is on the upswing from the market’s trough, it's uncertain yet whether it will reach 2009 levels in the near term. NAHB forecasts suggest the category will likely be volatile in the coming quarters as the single-family market continues its slow pace of recovery.

Single-family starts surged 10.7% to 869,000 in October, according to the latest Commerce Department data, as housing starts overall climbed 25.5% to a seasonally adjusted annual rate of 1.323 million during the month.

Meanwhile, new homes are trending smaller. Earlier this month, the NAHB reported that the number of U.S. home starts priced at $1 million or more nosedived 41.6% to 1,762 homes in 2015, continuing their decline since peaking in 2005. Their share of new home starts ticked up slightly from 0.55% in 2005 to 1.06% in 2015, however.

As homebuilders look to bring younger first-time buyers off the sidelines and into homeownership, they’re expected to put out homes with smaller footprints and more amenities. Meritage Homes, for example, is one such builder attempting to reach this market with its new LiVE.NOW. homes category priced from the low $200,000s and including energy-efficient features.

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