Framing Contractors
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 11,500 framing contractors in the US erect the structural framing and sheathing in buildings, using primarily wood. Single family homes account for 49% of industry sales. Other types of projects include apartment buildings and commercial buildings (stores, restaurants, gas stations, parking garages).
Vulnerability to Trends in the Housing Market
The framing contracting industry is primarily dependent on upstream demand from the residential construction industry, which is cyclical and sensitive to economic conditions.
Dependence on Skilled Labor
Framing contractors rely on a skilled labor force willing to perform physically demanding work in all types of weather conditions.
Industry size & Structure
The average framing contractor operates out of a single location, employs 7 workers, and generates about $1.4 million annually.
- The framing contracting industry consists of about 11,500 establishments that employ about 83,800 workers and generate about $16.6 billion annually.
- The industry is fragmented. Most firms are small, independent operators; over 70% of firms generate less than $500,000 annually.
- The framing stage accounted for 17-19% of construction costs, the second highest cost category, after interior finishes, according to the National Association of Home Builders (NAHB). Of the detailed items in new home construction, framing and trusses accounted for the largest share of costs (15-17%).
Industry Forecast
Framing Contractors Industry Growth
Recent Developments
Mar 15, 2023 - Banking Jitters Push Mortgage Rates Lower
- Mortgage rates dipped slightly after the collapse of Silicon Valley Bank, but housing industry watchers are uncertain if lower rates will persist long enough to provide much relief from the affordability issues that have slowed the US housing market, according to Yahoo Finance. Some financial market watchers note that the banking sector's jitters could slow the Federal Reserve’s strategy of taming inflation with rate hikes. Redfin chief economist Daryl Fairweather told Yahoo Finance, “There's still a lot of uncertainty but in the near term, I do expect mortgage rates to drop. And I expect buyers to take advantage of those mortgage rates because we've seen buyers be incredibly sensitive to those interest rates.” However, some industry insiders suggest that to lure more buyers into the market, rates would need to drop and stay low for a sustained period.
- Residential remodelers’ average gross and net profit margins declined in 2021, according to the 2023 edition of the Remodelers’ Cost of Doing Business Study released in March by the National Association of Home Builders (NAHB). Remodelers’ average gross profit margin grew steadily from 26.8% in 2011 to 30.1% in 2018, but in 2021 fell to 24.9%. The drop in gross margins was primarily due to higher trade contractor and homebuilding costs. However, remodelers’ average net margins were more resilient, dropping to 4.7% in 2021 from 5.2% in 2018. Steadily falling operating expenses between 2018 and 2021 held back a steeper decline in average net margins. The study also showed that residential remodeler participation in the single-family homebuilding market is rising. In 2018, 6% of total remodeler revenue came from single-family construction; in 2021, the share rose to 11%.
- Multifamily developer confidence improved in the fourth quarter of 2022 but remained in negative territory, according to February’s Multifamily Market Survey (MMS) report by the National Association of Home Builders (NAHB). The Multifamily Production Index (MPI) rose two percentage points in Q4 to 34 compared to the third quarter of 2022. The Multifamily Occupancy Index increased by four points to 49 over the same period. An MPI or MOI reading of 50 or more indicates that multifamily production or occupancy, respectively, is growing. While multifamily housing demand is robust, supply is catching up with demand in some markets. The NAHB expects multifamily production will slow significantly over the next two years after rapid growth in 2022. Developers face several challenges, including high regulatory costs, difficulty securing new project financing, and high interest rates.
- Framing contractors may enjoy better margins as lumber prices continue to drop compared to the record highs seen during the pandemic. In mid-March, lumber futures were trading around $413 per thousand board feet, up from about $402 a month earlier. However, lumber futures in mid-March of 2022 traded at $1,195 per thousand board feet. High interest rates have pushed up mortgage costs which have had a cooling effect on the US homebuilding industry and have reduced lumber demand and pricing. Some industry watchers note that when lumber prices fall, producers typically curtail production to push prices back up, according to GlobeSt.com.
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