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 188,800 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 188,800 companies that employ about 920,900 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
Apr 19, 2024 - Industry to Return to Steady but Flat Growth
- The residential building contractor industry will post slightly better-than-flat sales growth this year, but demand is projected to improve in the following four years. The industry’s year-over-year sales growth was up by 7.4% in 2022, then fell to -6.5% in 2023, according to Inforum and the Interindustry Economic Research Fund, Inc. Sales growth is projected to see a modest gain of 1.5% in 2024, then rise 8.9% in 2025. The industry will then see steady but gradually slowing average annual growth of about 7.6% through 2028, according to Inforum and the Interindustry Economic Research Fund, Inc.
- After suffering a drop in demand during the pandemic, occupancy rates for private-pay senior-housing communities are showing signs of improvement, according to The Wall Street Journal. In Q4 2023, the average occupancy rate for private-pay senior housing was just over 85%, according to industry trade group the National Investment Center for Seniors & Housing Care. While that’s still two percentage points below Q2 2020, it’s a significant improvement over the COVID-era low of 77.8% in the first half of 2021. Some industry observers say the turnaround is partly due to pent-up demand by seniors with the most acute healthcare needs, as they postponed moving to assisted living during the pandemic. However, demand for senior housing with little or no healthcare offerings remains soft. Nearly 90% of people between the ages of 50 and 80 want to stay in their homes as long as they can, according to a 2022 poll by the University of Michigan.
- Total US residential building construction spending is projected to be flat with 0% growth in 2024 compared to 2023, according to FMI’s second-quarter 2024 North American Engineering and Construction Outlook. Single-family construction spending is projected to be flat in 2024, year-over-year. To compete with existing home sales, builders are luring buyers with incentives while offering smaller homes with fewer frills but on larger lots. While 30-year mortgage rates are expected to be in the 6% to 7% range, new-home prices have come down from their highs in 2022, which could bring more buyers off the sidelines. FMI expects single-family construction spending to rise 7% in 2025. Spending for multifamily is expected to decline 8% in 2024 after projects in development peaked at 1 million units in mid-2023. Multifamily spending is forecast to drop another 16% in 2025. Supported by a median home age of 40, home improvement spending is expected to rise by 2% in 2024 and another 5% in 2025.
- US multifamily construction starts are expected to slow further in 2024 after mounting weakness in 2023, according to the National Association of Home Builders (NAHB). In 2023, multifamily starts fell 14% to 472,000 units. Multifamily starts are forecast to drop 20% in 2024 to 379,000. About 1 million multifamily units are currently under construction, the most since 1973. High levels of fresh inventory coming online will hinder new apartment building activity. A tight lending environment and high borrowing costs also challenge multifamily projects. The NAHB expects the residential remodeling market to remain flat in 2024 compared to 2023, then grow by about 2% in 2025. Remodeling is supported by a lack of existing homes on the market, high homeowner equity, and the aging of US housing stock.
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