Single-Family Home 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 55,660 single-family home construction service providers in the US oversee the entire construction of new single-family detached houses, townhouses, and row houses. The industry includes general contractors and design-build firms. Firms do not own the land they are building upon.
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.
Variable Material and Labor Costs
The cost of construction materials and labor can vary significantly and affect profitability for new home builders.
Industry size & Structure
The average single-family home construction services provider operates out of a single location, employs three to four workers, and generates between $1 million and $2 million annually.
- The single-family home construction services industry consists of about 55,660 firms that employ over 396,200 workers and generate almost $70 billion annually.
- The industry is highly fragmented; the top 50 companies account for just over 15% of industry revenue. Most firms serve a limited geographical area.
- About half of firms generate less than $1 million annually and 40.9% generate less than $500,000 annually.
Industry Forecast
Single-Family Home Builders Industry Growth
Recent Developments
Apr 19, 2024 - Industry Growth Poised for Rebound
- The single-family home-building industry is expected to see weak sales growth this year, but demand is projected to improve in the following four years. The industry’s year-over-year sales increased by 6.9% in 2022 before plummeting to -14.9% in 2023, according to Inforum and the Interindustry Economic Research Fund, Inc. Sales growth is projected to rise by 2.1% in 2024, then increase by 10.6% in 2025. The industry will then see steady but gradually moderating average annual growth of about 7.9% through 2028, according to Inforum and the Interindustry Economic Research Fund, Inc.
- Home builder confidence was unchanged in April as mortgage rates and inflation remained elevated, according to the National Association of Home Builders (NAHB). Home builder sentiment, as measured by the NAHB/Wells Fargo Housing Market Index (HMI), was flat at 51 in April 2024, which marked the breaking of a four-month streak of HMI increases. Any HMI reading over 50 indicates that more builders see conditions as good than poor. The NAHB said that while hotter-than-expected inflation data have given some potential buyers pause, the trade group continues to expect the Federal Reserve to announce future rate cuts before the end of the year, which will lead to moderating mortgage rates in the second half of 2024.
- Higher consumer prices, a leading indicator of inflation, came in hotter than expected, which could push mortgage rates higher, according to the National Association of Realtors (NAR). Bureau of Labor Statistics data show that the consumer price index (CPI) rose to 3.5% in March. The Federal Reserve has indicated that it won’t reduce the short-term benchmark interest rate until the CPI drops to the Fed’s target of 2%. NAR Chief Economist Lawrence Yan said, “March inflation figures were very bad, which also means bad news for interest rates. Mortgage rates, unfortunately, will move a notch higher and are likely to cross above 7% in the upcoming weeks.” High mortgage rates have put downward pressure on housing demand, which could reduce single-family construction activity.
- 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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