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The Average Profit Margin of Single-Family Builders


The Average Profit Margin of Single-Family Builders

Though not fully recovered to pre-recession numbers, the gross profit margins and net profit margins of the average single-family builder have shown steady improvement

March 22, 2016
Single-family home built by U.S. home building company

NAHB recently conducted a survey of single-family builders, asking them to provide their income statements and balance sheets in an effort to gain a better overall understanding of the average profit margin of single-family builders and how the industry is looking overall.

Builders responding to the survey reported an average of $16.2 million in revenue for fiscal year 2014, according to the Eye On Housing blog. Of that $16.2 million, $13.2 million was spent on things such as land costs and direct and indirect construction costs, leaving an 18.9 percent, or $3.1 million, gross profit margin. Additionally, operating expenses such as finance, marketing, and owner’s compensation, ate another $2 million, leaving $1 million (6.4 percent) as the average net profit.

This 18.9 percent gross profit margin is at a level not seen since 2006, when the gross profit margin for single-family builders was 20.8 percent. Since falling in 2008 the gross profit margin has been rising steadily. The net profit margin of 6.4 percent for 2014 was also the highest since 2006 saw a 7.7 percent margin. In 2008 the net profit margin dropped to -3.0 percent and has been steadily rising ever since.

According to balance sheets for fiscal year 2014, builders had total assets worth an average of $9.2 million, with $6.2 million backed up by liabilities and $3.0 million held as equity. The average total assets for 2014 were slightly higher than the $8.9 million of 2012 and significantly higher than the $6.2 million posted in 2010.

Equity accounted for 26 percent of builders’ assets in 2006, and in 2014 that number jumped to 33 percent.

For a full breakdown of the survey, click the link below.

Read more


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