Single-Family Home 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 58,000 single-family home construction service providers in the US oversee the entire construction of new single-family detached houses, townhouses, and row houses. The industry includes general contractors and design-build firms. Firms do not own the land they are building upon.

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.

Variable Material and Labor Costs

The cost of construction materials and labor can vary significantly and affect profitability for new home builders.

Industry size & Structure

The average single-family home construction services provider operates out of a single location, employs 6-7 workers, and generates between $1 million and $2 million annually.

    • The single-family home construction services industry consists of about 58,000 firms that employ over 381,000 workers and generate almost $70 billion annually.
    • The industry is highly fragmented; the top 50 companies account for just over 15% of industry revenue. Most firms serve a limited geographical area.
    • About half of firms generate less than $1 million annually and 40.9% generate less than $500,000 annually.
                          Industry Forecast
                          Single-Family Home Builders Industry Growth
                          Source: Vertical IQ and Inforum

                          Recent Developments

                          Jun 18, 2024 - Residential Building Materials Prices Mostly Unchanged in May
                          • In May, US producer prices for materials used in residential construction fell 0.09%, according to National Association of Home Builders analysis of Bureau of Labor Statistics data. While the slight dip in pricing wasn’t much of a change from the previous month, it was the first drop in residential building materials pricing since October 2023. However, residential construction input prices were up 2.9% compared to May 2023. Softwood lumber prices fell 5% in May from April and declined 8.1% year-over-year. Prices for copper increased 8.5% in May over the previous month and were up 17.1% over May 2023. Gypsum building materials prices in May remained at April levels and were up 2.1% compared to a year earlier. May prices for ready-mix concrete fell 0.1% from April but were 5.6% higher year-over-year.
                          • More home designers, builders, and home buyers are using AI-enabled apps to make their decisions about home designs and remodeling, according to The Wall Street Journal. The developers of AI home design apps suggest the tools can save time and money by quickly visualizing dozens of designs and layout ideas, estimating costs, and coordinating interactions between the designer, contractors, and homeowner. Some apps are more focused on remodeling, enabling homeowners to sample different designs after uploading photos or drawings of their rooms. Other apps cater more to the design-build community by generating floor plans and managing project logistics.
                          • High interest rates have slowed the US housing market, a key demand driver for site prep contractors. In May 2024, the average 30-year fixed-rate mortgage rose seven basis points to 7.06% compared to 6.99% in April, according to Freddie Mac. May’s rate was up 64 basis points from May 2023, when the average 30-year fixed-rate mortgage was 6.34%. The National Association of Home Builders (NAHB) expects 30-year mortgage rates to linger in the 6.66% range through the end of the year and dip slightly below 6% by the end of 2025. The NAHB projects that the Federal Reserve will announce a rate cut at its meeting in December, and there will be another six cuts in 2025.
                          • Amid a shortage of existing homes on the market, 61% of home buyers prefer new homes, according to a recent survey by the National Association of Home Builders (NAHB). The survey’s results show the highest share of new-home preference since 2007 when 63% of home buyers preferred new construction. Homeowners who locked in a low interest rate before 2022, when the Federal Reserve began raising interest rates, are reluctant to sell and swap their low-interest loans for a higher rate. New single-family homes have filled the void in the market left by a lack of existing homes for sale. Residential construction is a key demand driver for plywood and engineered wood products.
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