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 11,800 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 nearly $13 million annually.
- The new housing building industry consists of about 11,800 firms that employ 53,500 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
Jan 24, 2025 - Residential Construction Loan Volumes Decline
- In the third quarter of 2024, the volume of outstanding residential acquisition, development, and construction (AD&C) loans made by FDIC-insured institutions declined for the third quarter in a row, according to the National Association of Home Builders (NAHB). The value of residential AD&C loans in Q3 2024 was $490.7 billion compared to $495.8 billion in Q2 2024. The volume of residential AD&C loans is expected to rise in 2025 as the Federal Reserve continues its monetary easing policies, but potential headwinds include the federal deficit and economic uncertainty.
- In the third week of January 2025, commodity prices for lumber were about $552 per thousand board feet - essentially unchanged from a month earlier, according to Trading Economics. Lumber prices were also flat on a year-over-year basis. Shortly after taking office, President Trump warned he would impose a 25% tariff on lumber imports from Canada beginning on February 1st, 2025. A higher tariff on Canadian lumber imports would push prices higher, which could reduce lumber demand as builders look to alternative materials. Canada is the largest foreign supplier of lumber to the US market.
- Construction costs’ share of the average price of a home rose to 64.4% in 2024, according to analysis of US Census Bureau data by the National Association of Home Builders (NAHB). In 2022, construction costs accounted for 60.8% of the average price of a home. At 13.7%, finished lots were the second highest cost in 2024. Interior finishes held the highest share of total construction costs in 2024 at 24.1%, followed by major system rough-ins (19.2%), framing (16.6%), exterior finishes (13.4%), foundations (10.5%), site work (7.6%), final steps (6.5%), and other costs (2.1%).
- Home builder confidence in the single-family market moved higher in January 2025 amid hopes of improved economic growth and regulatory reforms, according to the National Association of Home Builders (NAHB). Home builder sentiment, as measured by the NAHB/Wells Fargo Housing Market Index (HMI), ticked up one point to 47 in January from 46 the previous month. Any HMI reading over 50 indicates that more builders see conditions as good than poor. While builders are still concerned about high interest rates and elevated land and financing costs, they are also hopeful that policymakers are aware of the industry’s headwinds and will move to reduce regulations.
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