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 27, 2023 - Single-Family Homes Sales Rise
- New single-family home sales increased 9.6% month over month but declined 3.4% year over year in March 2023, according to the US Department of Commerce. Lower mortgage rates and tight housing inventories helped drive March new home sales even as buildings continue to struggle with high costs for materials and supply chain issues, according to the National Association of Home Builders (NAHB). The median new home sales price in March was $449,800, up 3.8% from February and 3.2% compared to March 2022.
- The number of building permits issued for single-family, privately-owned housing units decreased 8.8% month over month and was down 24.8% year over year in March 2023. Single-family housing starts fell 0.8% month over month and decreased 17.2% year over year in March. Housing completions dropped 0.6% month over month but rose 12.9% year over year in March. The drop in March housing starts was mainly due to a 6.7% monthly decline in multifamily; single-family starts rose 2.7%. With tight overall housing inventories, especially for existing homes, homebuilders have an opportunity to meet housing demand with new construction, according to Bloomberg. However, headwinds include elevated mortgage rates and tightening lending standards.
- US mortgage applications rose 3.7% for the week ending April 21, 2023, according to the Mortgage Bankers Association (MBA). The average 30-year fixed rate mortgage rose 13 basis points to 6.55%. Seasonally adjusted purchasing activity increased 5% for the week ending April 21st compared to the prior week. MBA Vice President and Chief Economist Joel Kan said, “Both conventional and government home purchase applications increased last week. However, activity was still nearly 28 percent below last year’s pace, as high mortgage rates and low supply have slowed the market this year, even as home-price growth has decelerated in many markets across the country.”
- Prospective homebuyers’ outlook for housing availability improved somewhat in the first quarter of 2023, according to the National Association of Home Buyers (NAHB). In Q1 2022, 26% of buyers said they expect their home search to get easier in the coming months, which is up from 24% in Q4 2022. However, buyer mood is off significantly from Q3 2023 when 37% were optimistic about improved housing availability. By region, buyers’ availability outlook was strongest in the West with 29% being optimistic, followed by the Northeast (27%), the South (24%), and the Midwest (20%).
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