Residential Building Contractors

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 170,500 residential building contractor firms in the US build single and multi-family homes (condos and townhouses) and provide remodeling services. The majority of new single-family homes are speculative homes, in which the contractor owns the land and begins construction without a sales contract. Contractors that build speculative homes are known as operative builders. About 78% of residential building contractors are solo operators.

Reliance On Credit Markets

The availability of credit affects potential buyers’ ability to secure a mortgage and contractors’ access to capital.

Reliance On Subcontractors

Residential building contractors rely on subcontractors for a high percentage of work.

Industry size & Structure

The average residential building contractor employs 4-5 workers and generates $2 million in annual revenue.

    • The residential building contractor industry consists of about 170,500 companies that employ about 813,400 workers and generate $342 billion annually. An additional 674,400 solo-practitioners generate $54 billion annually.
    • Remodelers account for 62% of firms; single-family general contractors are 29%; operative builders are 7%; and multi-family contractors are 2%.
    • While residential construction includes private and public projects, the vast majority of work is in the private sector.
    • About 80% of residential building contractors employ fewer than 5 workers and together cover 22% of the industry's payroll.
    • About 20 establishments are very large, employing over 500 workers each and together covering 3% of industry payroll.
    • Large companies include D.R. Horton, Pulte Homes, Lennar Corporation, NVR, and KB Home.
                              Industry Forecast
                              Residential Building Contractors Industry Growth
                              Source: Vertical IQ and Inforum

                              Coronavirus Update

                              May 11, 2022 - Home Builders Court Wealthy Investors
                              • In 2021, the vast majority of new homes were sold to individual buyers, but as interest rates and home prices push higher, builders are increasingly catering to investors who are buying homes in bulk, according to The Wall Street Journal. More than 25% of the homes purchased by professional rental investors in the fourth quarter of 2021 were newly-built homes, according to a recent report by John Burns Real Estate Consulting LLC and the National Rental Home Council. In the third quarter of 2019, only 3% of homes bought by investors were new construction. The trend may accelerate as the lack of affordability becomes an issue for more potential individual buyers.
                              • Homebuilder sentiment, as measured by the National Association of Home Builders/Wells Fargo Housing Market Index, decreased to 77 in April 2022 from 79 in March, marking the fourth consecutive monthly decline. Higher materials costs and rapidly rising interest rates are making housing less affordable, which is weighing on builder confidence. Builders report that sales traffic and current sales conditions are at their lowest levels since summer 2021. Higher mortgage rates and supply chain disruptions have unsettled the US housing market, especially for potential first-time homebuyers.
                              • The number of building permits issued for privately-owned housing units increased 0.4% month over month and rose 6.7% year over year in March 2022. Housing starts increased 0.3% month over month and 3.9% year over year in March. Housing completions decreased 4.5% month over month and fell 13% year over year in March.
                              • Total construction spending increased 0.1% in value month over month on an adjusted basis and 11.8% in value year over year on an unadjusted basis in March 2022, according to the US Census Bureau. Residential construction spending increased 1% month over month and 17.8% year over year in March.
                              • New single-family home sales decreased 8.6% month over month and declined 12.6% year over year in March 2022, according to the US Department of Commerce.
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