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 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 200,000 residential building contractors 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 about $2 million in annual revenue.
- The residential building contractor industry consists of about 200,000 companies that employ about 927,000 workers and generate $342 billion annually.
- An additional 795,000 solo-practitioners generate $61 billion annually.
- Remodelers account for 63% of establishments; single-family general contractors are 29%; operative builders are 6%; 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
Recent Developments
Jul 19, 2024 - Residential Outlook Mixed
- The outlook for the US residential construction market is expected to be mixed over the next few years, according to FMI’s third-quarter 2024 North American Engineering and Construction Outlook. Despite high interest rates, single-family construction spending is forecast to rise 7% in 2024 as homebuilders reduce home sizes to improve affordability. Single-family spending will increase another 7% in 2025, 5% in 2026, 7% in 2027, and 8% in 2028. Spending for multifamily is expected to decline by 1% in 2024 after projects in development peaked at 1 million units in mid-2023. Multifamily spending will drop 17% in 2025 and 8% in 2026 as the influx of new supply outstrips demand. Spending for multifamily projects will then grow by 6% in 2027 and 11% in 2028.
- Home builder confidence in the single-family market dropped in July 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 one point to 42 in July 2024. Any HMI reading over 50 indicates that more builders see conditions as good than poor. The HMI survey also showed that 31% of builders have reduced home prices to lure potential buyers off the sidelines, although the average price reduction of 6% remained unchanged for the thirteenth consecutive month.
- Low- to medium-density multifamily building construction has grown to account for a larger share of the overall multifamily market in recent years, according to National Association of Home Builders analysis of US Census Bureau data. In 2024, there were 450,000 multifamily housing unit completions, marking the highest level in 37 years. Of those, 216,000 were buildings with fewer than 50 units, which was the largest share for low- to medium-density buildings since 2006.
- A trend in smaller lot sizes for single-family detached homes has accelerated in recent years, according to the latest Survey of Construction by the US Census Bureau. Even as more families decamped to suburban areas seeking more space during the pandemic, lot sizes have continued to shrink. In 2023, lot sizes of less than 0.16 acres (less than 7,000 square feet) accounted for 40% of new single-family home sales compared to 30% in 2011. The share of lots under 0.16 acres has risen two percentage points since the pandemic began. Shrinking lot sizes suggest that firms that build homes speculatively have reduced lot and home sizes to cope with lot shortages and to offer more affordable homes as housing costs have risen.
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