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 55,660 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 55,660 firms that employ over 396,200 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

                          Jan 29, 2024 - Builder Sentiment Improves
                          • Home builder confidence improved in December amid moderating mortgage rates that remained well 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 seven points to 44 in December 2022, which marked the second 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.
                          • A lack of existing home listings helped drive stronger demand for newly built homes in December 2023, according to the Mortgage Bankers Association (MBA). The MBA’s Vice President and Deputy Chief Economist Joel Kan said, “The low level of existing homes for sale continues to divert prospective buyers to newly built homes. Mortgage applications for new homes showed a 22 percent annual gain in December – the 11th consecutive year-over-year increase in applications. Compared to November 2023, applications were down 4 percent on a non-seasonally adjusted basis, consistent with December declines for the past two years.”
                          • Just 15.5% of homes listed for sale in 2023 were affordable for the typical US household, according to Redfin. The overall number of listings in 2023 declined 21.2% compared to 2022, but the drop in affordable home selection was also due to high interest rates and elevated home prices. There are also fewer homes on the market as homeowners who locked in a mortgage when rates were cheap are reluctant to sell, and a shortage of available inventory has contributed to rising home prices. However, conditions are expected to improve in 2024. Redfin’s Senior Economist Elijah de Campa said, “Many of the factors that made 2023 the least affordable year for homebuying on record are easing. Mortgage rates are under 7% for the first time in months, home price growth is slowing as lower rates prompt more people to list their homes, and overall inflation continues to cool.”
                          • Pressures, including high interest rates and a shortage of new homes available to purchase, are prompting housing bulls on Wall Street to construct entire build-to-rent communities, according to The Wall Street Journal. In Q3 of 2023, large landlords that own between 100 and 1,000 homes purchased just 1% of homes sold in the US, compared to 3% for all of 2022, according to John Burns Research and Consulting. Once a model that worked well when foreclosure rates were higher, industry watchers suggest that finding and managing investment homes individually has become too time-consuming, costly, and inefficient. While the build-to-rent community market is still small – about 900 neighborhoods in the US, according to the Urban Institute – the National Association of Home Builders believes that soon 10% of new homes will be build-for-rent.
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