New Housing For-Sale Builders
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 11,600 new housing for-sale builders in the US build single-family and multi-family homes on land that is owned or controlled by the builder. New housing for-sale builders are also known as merchant builders, production builders, or operative builders. Large firms may also provide related services, such as mortgage financing or title services.
High Cost of Land Investment
The new home building industry is capital intensive and requires significant upfront investment in land, the value of which can vary depending on market conditions.
Dependence on Subcontractors
New home construction is highly dependent on subcontractors, with most firms directly employing a limited number of workers to oversee subcontracting activity.
Industry size & Structure
The average new housing builder operates out of a single location, employs about 5 workers, and generates about $13 million annually.
- The new housing building industry consists of about 11,600 firms that employ 52,900 workers and generate about $150 billion annually.
- The industry is concentrated at the top and fragmented at the bottom; the top 50 companies account for 55% of industry revenue.
- Large firms include D.R. Horton, Lennar, and Pulte Group.
- Most of the new homes built in the US are “built for sale” or built by a developer that owns the land.
Industry Forecast
New Housing For-Sale Builders Industry Growth
Recent Developments
Apr 29, 2024 - Industry to Return to Growth
- After solid growth during the pandemic, demand for new home purchases dropped amid elevated mortgage rates and high home prices. However, pent-up demand for homes remains, and some industry watchers expect home sales to improve as interest rates gradually come down. The new housing for-sale builder industry posted year-over-year growth of 6.2% in 2022 before declining by 9% in 2023, according to Inforum and the Interindustry Economic Research Fund, Inc. The industry is expected to return to modest growth of 1.2% in 2024 and 9.1% in 2025, then see average annual growth of about 7.1% through 2028, according to Inforum and the Interindustry Economic Research Fund, Inc.
- Mortgage applications for new home purchases increased 6.1% in March compared to the same month a year earlier, according to the Mortgage Bankers Association (MBA). Applications were up 1% over February. However, the MBA noted that while applications saw year-over-year improvement, the annual growth rate was still the slowest since September 2023. The MBA’s Vice President and Deputy Chief Economist Joel Kan said, “Homebuyers remain adversely impacted by strong home-price growth and mortgage rates hovering around 7 percent. The FHA share of applications did increase in March, exceeding 26 percent, compared to a 24 percent average for the prior 12 months. A higher FHA share can be a sign of more first-time buyer activity, but that segment of buyers is also more sensitive to affordability challenges.”
- About 77% of US households are currently priced out of the US housing market for new homes, according to an April report by the National Association of Home Builders (NAHB). Amid high home prices and interest rates, 103.5 million households are unable to purchase a median-priced new home ($495,750). By the NAHB’s measure, to be considered affordable, the sum of the mortgage payment, property taxes, and homeowners and mortgage insurance must not exceed 28% of household income in the first year of ownership.
- Total US single-family construction spending is projected to be flat in 2024, year-over-year, according to FMI’s second-quarter 2024 North American Engineering and Construction Outlook. To compete with existing home sales, builders are offering incentives while offering smaller homes with fewer frills but on larger lots. While 30-year mortgage rates are expected to be in the 6% to 7% range, new-home prices have come down from their highs in 2022, which could bring more buyers off the sidelines. FMI expects single-family construction spending to rise 7% in 2025, then grow 6% in 2026 and 2027, and 7% in 2028.
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