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
Jun 28, 2024 - Home Builder Confidence Drops
- Home builder confidence in the single-family market dropped in June to the lowest level since December 2023 amid high mortgage rates and elevated builder financing costs, according to the National Association of Home Builders (NAHB). Home builder sentiment, as measured by the NAHB/Wells Fargo Housing Market Index (HMI), fell two points to 43 in June 2024. Any HMI reading over 50 indicates that more builders see conditions as good than poor. The HMI survey also showed that 29% of builders have reduced home prices to lure potential buyers off the sidelines, although the average price reduction of 6% remained unchanged for the twelfth consecutive month.
- In May, US producer prices for materials used in residential construction fell 0.09%, according to National Association of Home Builders analysis of Bureau of Labor Statistics data. While the slight dip in pricing wasn’t much of a change from the previous month, it was the first drop in residential building materials pricing since October 2023. However, residential construction input prices were up 2.9% compared to May 2023. Softwood lumber prices fell 5% in May from April and declined 8.1% year-over-year. Prices for copper increased 8.5% in May over the previous month and were up 17.1% over May 2023. Gypsum building materials prices in May remained at April levels and were up 2.1% compared to a year earlier. May prices for ready-mix concrete fell 0.1% from April but were 5.6% higher year-over-year.
- A lack of existing home listings helped drive demand for newly built homes in May 2024, according to the Mortgage Bankers Association (MBA). Mortgage applications for new home purchases rose 13.8% in May compared to a year earlier. New home mortgage applications in May were up 1% over April. The MBA’s Vice President and Deputy Chief Economist Joel Kan said, “There continues to be strength in the new home purchase market, as purchase applications increased in May compared to both the prior month and from a year ago. With existing-home inventory still lagging in many markets, many homebuyers have turned their interest toward newly built homes, particularly FHA borrowers.”
- More builders, designers, and homeowners are using AI-enabled apps to make their decisions about home designs and remodeling, according to The Wall Street Journal. The developers of AI home design apps suggest the tools can save time and money by quickly visualizing dozens of designs and layout ideas, estimating costs, and coordinating interactions between the designer, contractors, and homeowner. Some apps are more focused on remodeling, enabling homeowners to sample different designs after uploading photos or drawings of their rooms. Other apps cater more to the design-build community by generating floor plans and managing project logistics.
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