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
Feb 28, 2024 - Industry to Return to Growth
- After solid growth during the pandemic, demand for new home purchases dropped amid elevated mortgage rates and high home prices. However, pent-up demand for homes remains, and some industry watchers expect home sales to improve as interest rates gradually come down. The new housing for-sale builder industry posted year-over-year growth of 31.5% in 2021 and 4.6% in 2022 before declining by 9% in 2023, according to Inforum and the Interindustry Economic Research Fund, Inc. The industry is expected to return to modest growth of 2.6% in 2024, then grow by 8.8% in 2025, 10% in 2026, and 9.7 in 2027, according to Inforum and the Interindustry Economic Research Fund, Inc.
- In the fourth quarter of 2023, US housing affordability remained mostly unchanged from Q3, when it fell to its lowest point since the National Association of Home Builders (NAHB) began tracking the metric in 2012. Many would-be buyers are priced out of the market amid rising mortgage rates, inflation, low housing inventory, and high home prices. According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI), only 37.7% of new and existing homes sold between early October 2023 and the end of December were affordable for households with a median income of $96,300. According to the HOI, the median home price in Q4 2023 was $375,000, down slightly from $388,000 in Q3, but average mortgage rates rose to 7.44% from 7.13% over the same period.
- To cope with housing shortages and a lack of affordability, many municipalities are changing their zoning rules to encourage more housing development, according to NPR. Cities find their zoning rules rigid and outdated, making building new housing stock difficult and expensive. Some cities are changing their rules to allow more multifamily developments, including townhomes and apartments, and permitting accessory dwelling units (ADUs), which add a secondary structure on one lot. Some cities have also reduced lot-size requirements, encouraging greater density and the number of available housing units.
- Home sizes increased during the pandemic as families sought more space, and interest rates were near record lows. As interest rates have risen and homes have become less affordable, the trend is reversing, and homes are getting smaller, according to National Association of Home Builders (NAHB) analysis of Census Bureau data. In the fourth quarter of 2023, the median single-family home square footage was 2,156, which is the lowest since 2010. The NAHB suggests that smaller home sizes will likely persist amid continued affordability issues.
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