NAHB Builders’ Businesses Showed Significant Growth in 2021

2022-09-30T08:20:13-05:00

The business of the typical NAHB (National Association of Home Builders) builder grew significantly between 2020 and 2021, according to results from NAHB’s latest member census.  The 2021 NAHB census shows that the median gross revenue of an NAHB builder in 2021 was $3.3 million, up 29.6 percent from the previous year. NAHB reinstated its member census during the industry-wide downturn of 2008, when median annual revenue of builder members was only around $1.0 million.  Median annual revenue began rising in 2013, plateauing at $2.6 to $2.7 million from 2017 through 2020.  The $3.3 million recorded in 2021 thus represents an all-time high, as well as a substantial 26.9 percent increase from the 2020 number. Although their median revenue has increased recently, most NAHB builders remain relatively small businesses by conventional standards.  In the 2021 NAHB census, 14 percent of NAHB’s builder members reported a dollar volume of less than $500,000, 13 percent reported between $500,000 and $999,999, 38 percent between $1.0 million and $4.9 million, 15 percent between $5.0 million and $9.9 million, 6 percent between $10.0 million and $14.9 million, and 13 percent reported dollar volume of $15.0 million or more.  In comparison, the Small Business Administration’s size standards classify most types of construction businesses as small if they have average annual receipts of less than $39.5 million. The NAHB census also asks builder members about the number of homes started.  On average, NAHB builders started an average of 63.1 homes in 2021 (41.6 single-family units and 21.5 multifamily homes).  The median number of housing starts was 6.  Because the data on starts include a small percentage of very large builders, the average number of starts is much higher than the median, and for many purposes the median number of 6 housing starts is more representative of the typical builder. The median number of starts increased by an even 20.0 percent, from 5 in 2020 to 6 in 2021.  Although the average number of starts is more sensitive than the median to results reported by a relatively small number of large builders, the average can be useful for illustrating industry trends.  The trend in average starts per builder has been generally upward over the long term. Agreeing with the increase in builder revenue, there was a particularly strong surge in the average number of housing starts per builder between 2020  and 2021.  The increase was 53.9 percent—from 41.0 in 2020 to 63.1.  The average number of single-family starts grew by 58.2 percent (from 26.3 to 41.6), while the average number of multifamily starts increased by 46.3 percent (from 14.7 to 21.5). Not surprisingly, multifamily builders tend to start more homes per year than single-family builders.  NAHB’s multifamily builders reported a median of 84 housing starts in 2021, compared to 6 for single-family builders. This information was originally published in the August 2022 Special Study available on NAHB’s Housing Economics web page.  For more information, including median dollar volume, starts and employment as well as basic demographics for each of the major types of NAHB builder member, please consult the longer special study. Related ‹ Almost Even Split Between Natural Gas and Electric Heating Systems in New HomesTags: builder members, dollar volume, economics, home building, housing, member census, NAHB Builder Members, NAHB builders, NAHB Census, NAHB members, revenue, starts

NAHB Builders’ Businesses Showed Significant Growth in 20212022-09-30T08:20:13-05:00

Housing Permits Fall Back Again in August

2022-09-20T10:16:29-05:00

In August, housing starts rebounded but housing permits declined for the second straight month. The August drop in building permits indicates that the housing market is continues to cool as rising construction costs, elevated mortgage rates and supply chain disruptions continue to act as a drag on the market. Overall housing starts rose 12.2% to a seasonally adjusted annual rate of 1.58 million units in August, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The August reading of 1.58 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Single-family starts increased 3.4% to a 935,000 seasonally adjusted annual rate and are down 4% on a year-to-date basis. Declines are expected ahead, as single-family permits decreased 3.5% to an 899,000 annualized rate and are down 6.6% on a year-to-date basis. NAHB is forecasting 2022 to be the first year since 2011 to record an annual decline in single-family home building. A housing recession is underway with builder sentiment falling for ninth consecutive months. In September, single-family builder confidence decreased three points to a level of 46, the lowest level since May 2014 with the exception of the spring of 2020, according to the NAHB/Wells Fargo Housing Market Index (HMI). Builders are reporting weakening traffic as housing affordability declines. The multifamily sector, which includes apartment buildings and condos, increased 28% to an annualized 640,000 pace. Multifamily construction remains very strong given solid demand for rental housing. The number of multifamily 5+ units currently under construction is up 26.5% year-over-year. Multifamily development is being supported by a substitution effect, with frustrated or priced out prospective home buyers seeking rental housing. However, multifamily permits decreased 17.9% to an annualized 618,000 pace. The number of single-family homes permitted but not started construction peaked in July due to supply-chain issues. In August, there were 143,000 homes authorized but not started construction. The number of multifamily 5+ units permitted but not started construction is down 31.2% year-over-year to 143,000 units. On a regional and year-to-date basis, combined single-family and multifamily starts are 4.6% higher in the Northeast, 2.4% lower in the Midwest, 5.6% higher in the South and 1.5% lower in the West. Looking at regional permit data on a year-to-date basis, permits are 3.1% lower in the Northeast, 1.2% higher in the Midwest, 1.2% higher in the South and 1.4% lower in the West. As an indicator of the economic impact of housing and as a result of accelerating permits and starts in recent quarters, there are now 812,000 single-family homes under construction. This is 14% higher than a year ago. There are currently 890,000 apartments under construction (2+ unit properties), up 27% from a year ago with this number continuing to rise. This is the highest level since the first quarter of 1974. Total housing units now under construction (single-family and multifamily combined) is 21% higher than a year ago. The number of single-family units in the construction pipeline is now falling and will continue to decline in the months ahead given recent declines in buyer traffic. Related ‹ Builder Confidence Falls for Ninth Straight Month as Housing Slowdown ContinuesTags: economics, home building, housing, multifamily, starts

Housing Permits Fall Back Again in August2022-09-20T10:16:29-05:00

Housing Starts Weaken in July

2022-08-16T09:21:54-05:00

A sharp decline in single-family home construction is another indicator that the housing slowdown is showing no signs of abating, as rising construction costs, elevated mortgage rates and supply chain disruptions continue to act as a drag on the market. Overall housing starts fell 9.6% to a seasonally adjusted annual rate of 1.45 million units in July, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The July reading of 1.45 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Single-family starts decreased 10.1% to a 916,000 seasonally adjusted annual rate and are down 2.1% on a year-to-date basis. This is the lowest reading for single-family home building since June 2020. More declines lie ahead, as single-family permits decreased 4.3% to a 928,000 unit rate and are down 5.9% on a year-to-date basis. NAHB is forecasting 2022 to be the first year since 2011 to record an annual decline in single-family home building. A housing recession is underway with builder sentiment falling for eight consecutive months, while the pace of single-family home building has declined for the last five months. The decline in single-family starts is reflected in the HMI measure of builder sentiment, as housing demand continues to weaken on higher interest rates while on the supply side builders continue to grapple with higher construction costs. Builders are reporting weakening traffic as housing affordability declines. The multifamily sector, which includes apartment buildings and condos, decreased 8.6% to an annualized 530,000 pace. Multifamily construction remains very strong given solid demand for rental housing. The number of multifamily 5+ units currently under construction is up 24.8% year-over-year. Multifamily development is being supported by a substitution effect, with frustrated or priced out prospective home buyers seeking rental housing. The number of single-family homes permitted but not started construction has likely peaked after rising over pervious quarters due to supply-chain issues. In July, there were 146,000 homes authorized but not started construction. This reading is flat year-over-year. In contrast, the number of multifamily 5+ units permitted but not started construction continues to rise, up 47% year-over-year to 147,000 units. On a regional and year-to-date basis, combined single-family and multifamily starts are 10.7% higher in the Northeast, 0.4% lower in the Midwest, 6.5% higher in the South and 2.2% lower in the West. Looking at regional permit data on a year-to-date basis, permits are 1.9% lower in the Northeast, 1.9% higher in the Midwest, 2.6% higher in the South and 0.2% higher in the West. As an indicator of the economic impact of housing and as a result of accelerating permits and starts in recent quarters, there are now 816,000 single-family homes under construction. This is 17% higher than a year ago. There are currently 862,000 apartments under construction, up 25% from a year ago with this number continuing to rise. Total housing units now under construction (single-family and multifamily combined) is 21% higher than a year ago. The number of single-family units in the construction pipeline is now falling and will continue to decline in the months ahead given recent declines in buyer traffic. Related ‹ Builder Confidence Falls for Eighth Consecutive MonthTags: economics, home building, housing, multifamily, starts

Housing Starts Weaken in July2022-08-16T09:21:54-05:00

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