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
                              Source: Vertical IQ and Inforum

                              Recent Developments

                              Mar 21, 2024 - Multifamily Starts to Drop in 2024, Remodeling Holds Steady
                              • 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.
                              • Apartment buildings are getting taller amid sustained demand for rentals, scarcity of land, and some cities’ willingness to change zoning rules to attract development, according to The Wall Street Journal. Between 2021 and 2023, US cities added more than 2,900 buildings with more than 200 units, a 17% increase of the number built between 2018 and 2020, according to property data firm Yardi. High interest rates and single-family home prices continue to prop up demand for rentals, even among those with relatively high incomes. Some cities are easing some zoning rules, such as minimums for parking. The economics of multifamily development have also changed. Higher construction costs mean buildings need to have more units to be profitable.
                              • Home builder confidence improved in March amid a lack of existing homes on the market and moderating mortgage rates that remained below 7%, according to the National Association of Home Builders (NAHB). Home builder sentiment, as measured by the NAHB/Wells Fargo Housing Market Index (HMI), rose three points to 51 in March 2024, which marked the highest HMI reading since July 2023 and the fourth consecutive month of strengthening confidence. Any HMI reading over 50 indicates that more builders see conditions as good than poor. The NAHB said that while lower interest rates have improved affordability and drawn more buyers back to the market, 2024 could bring supply-side headwinds, including shortages of workers, materials, and available lots.
                              • Total US residential building construction spending is projected to fall 6% in 2024 over 2023, according to FMI’s first-quarter 2024 North American Engineering and Construction Outlook. High interest rates will continue to challenge the US housing market. Single-family construction spending is forecast to drop 5% in 2024 after falling 14% in 2023. Spending for multifamily is expected to decline 15% in 2024 after projects in development peaked at 1 million units in mid-2023. Home improvement project spending will drop 4% in 2024 from 3% growth in 2023.
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