Builders are a smart and flexible lot. The five-year slide in housing production left some by the wayside, but many are still in business by adapting and using their experience to remain afloat.
Similar to the U.S. government’s decennial census, the NAHB takes a census of its members, but we do it every year. The NAHB doesn’t have the power of law to force responses, but we do have dedicated members who are generous with their time in order for everyone to better understand the industry. Because the collection method was changed in 2008, comparisons to the past can only go back that far.
In 2010, 59 percent of NAHB builder members listed single-family building as their primary business, which is down from two-thirds of builders in 2008. The largest sub-group within that broad category was custom building, at 32 percent of all builder members, down from 36 percent in 2008. Remodeling remains the second-most frequent primary activity at 27 percent. The share of builders listing remodeling as their primary business has increased (from 20 percent in 2008), confirming that builders sought other revenue avenues close to their expertise. Remodeling remains the most frequent secondary activity at 48 percent of all builders, similar to the 49 percent in 2008.
The next most frequent primary activities are single-family general contracting and single-family speculative building at 14 percent and 13 percent respectively. As expected, speculative building fell five percentage points from 18 percent in 2008. Commercial builders comprise 6 percent of builder members, land developers are 4 percent, and multifamily builders make up 3 percent of builder members. System-built members (modular, panelized, and log homes) comprise 1 percent but are the largest in average company revenue.
Combining primary and secondary activities, the single most frequent business in 2010 was residential remodeling for 57 percent of all builder members, followed by single-family custom building for 48 percent of builder members. Largest changes in overall activity were single-family speculative building, which fell from 34 percent to 21 percent as a business activity; single-family custom building, which fell from 58 percent to 48 percent; and land development, which fell from 22 percent to 14 percent. Residential remodeling grew four percentage points, and commercial remodeling grew from an almost indistinguishable 1 percent to 16 percent of builder members’ business.
The industry slide was evident in the size of firms although those that remained saw a slight improvement in 2010 over 2009. Median dollar volume for all builder firms was $936,400 in 2010, up 2.6 percent from 2009 but down 3.0 percent from 2008. The average number of employees also improved slightly in 2010 over 2009 going from 10.2 to 11.5 but remained below an average of 14.2 in 2008. For new-home builders, the average number of units reflected the same trend, rising from 22 in 2009 to 24 in 2010 but below the average production level of 30 in 2008. Single-family builders started an average of 21 homes, multifamily builders started an average of 109 homes, and system-built companies started an average of 164 homes in 2010.
The average builder has been a member of the NAHB for 14 years. Staying power and success are connected; the longer the membership, the greater annual revenue and the greater the number of homes started.
Members are mostly male (93 percent), their median age is 53, and half have at least an undergraduate degree. These demographics have changed little in the past three years but there are differences across builder segments. Land developers are older (median age of 57), 11 percent of land developers are female, and 72 percent of multifamily builders have completed college or have an advanced degree.
The industry has changed in three short but extremely difficult years. Builders have remolded their businesses, and the ones left are a bit larger and stronger. The smartest and shrewdest remain to supply the inevitable demand on the horizon.