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 48,000 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 three to four workers, and generates between $1 million and $2 million annually.

    • The single-family home construction services industry consists of about 48,000 firms that employ over 175,000 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

                          Feb 28, 2023 - New Home Sales Rise
                          • New single-family home sales increased 7.2% month over month but declined 19.4% year over year in January 2022, according to the US Department of Commerce. Lower mortgage rates and home prices, combined with builder incentives, helped push new home sales higher in January, according to the National Association of Home Builders. The median new home sales price in January was $427,500, down 8.2% from a month earlier.
                          • Seasonal patterns and moderating mortgage rates improved demand for new home purchases in January. US mortgage applications for new home purchases fell 3.5% in January to a year earlier, according to the Mortgage Bankers Association (MBA). However, new home mortgage applications rose 42% from December. The MBA’s Chief Economist said, “The 30-year fixed rate declined almost 40 basis points over the month, and this stirred some homebuyers to act, especially those who might have delayed their purchase when mortgage rates were higher.” The MBA suggested home builders may have offered more robust incentives to spur sales after the slowdown in 2022.
                          • While supply-side issues like labor and materials shortages were among home builders’ primary concerns in 2021 and 2022, attracting buyers is expected to become more of a problem in 2023, according to a recent survey by the National Association of Home Builders (NAHB). In 2022, 55% of home builders felt adverse media reports were making buyers more cautious, but 79% feel that way for 2023. In 2022, 49% of home builders felt prospective buyers believed home prices or interest rates would drop if they waited, while 80% of home builders expect buyers to have a wait-and-see approach in 2023. Just over 40% of home builders were concerned about the employment and economic situation in 2022, but 73% expect to be concerned about these issues in 2023.
                          • US home prices are sliding, but they may find their bottom by mid-year, according to Goldman Sachs. The Federal Reserve’s efforts to tame inflation with interest rate hikes have increased the cost of borrowing, contributing to higher home prices and stifling demand. However, thirty-year mortgage rates peaked at 7.24% in November, and inflation has also cooled, which could further reduce home prices. Goldman Sachs expects that by mid-2023, home prices will have fallen about 6% from their peaks. By that point, prices may reach bottom if inflation continues to fall, prompting the Fed to ease its rate-hike efforts.
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