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

                          Mar 19, 2024 - Single-Family Construction Spending to Drop in 2024
                          • Total US single-family construction spending is projected to fall 5% in 2024, year-over-year, after declining 14% in 2023, according to FMI’s first-quarter 2024 North American Engineering and Construction Outlook. Amid high interest rates, large builders have been using rate buy-downs and in-house financing to lure buyers. Smaller builders may struggle to compete in an incentive-driven environment. FMI expects single-family construction spending to stabilize at 1% growth in 2025, then rise another 5% in 2026 and 6% in 2027.
                          • 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.
                          • Home sizes increased during the pandemic as families sought more space, and interest rates were near record lows. As interest rates have risen and homes have become less affordable, the trend is reversing, and homes are getting smaller, according to National Association of Home Builders (NAHB) analysis of Census Bureau data. In the fourth quarter of 2023, the median single-family home square footage was 2,156, which is the lowest since 2010. The NAHB suggests that smaller home sizes will likely persist amid continued affordability issues.
                          • To cope with housing shortages and a lack of affordability, many municipalities are changing their zoning rules to encourage more housing development, according to NPR. In some cities, zoning rules have become rigid and outdated, making building new housing stock difficult and expensive. Increasingly, cities are changing their rules to allow more multifamily developments, including townhomes and apartments, and permitting accessory dwelling units (ADUs), which add a secondary structure on one lot. Some cities have also reduced lot-size requirements, encouraging greater density and the number of available housing units.
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