This article first appeared on Probuilder.com on January 31, 2023.
In 2021, home builders recorded the best average net profit—12.06%—in the 29 years that Shinn Builder Partnerships has collected and published detailed home builder financial and operational information. The next-best average net profit of 11.41 was recorded in 2020.
In addition, the average sales volume in 2021 among participating builders jumped 21.1% to more than $94 million—far more than the average revenue of around $75 million for the last few years.
Housing’s Best Decade Ever
In 2020, we published a special report titled “The Roaring 2020s: Housing’s Best Decade,” which outlines why this will be the best decade for housing demand in U.S. history. Here are two main reasons why:
- A housing shortage: The Great Recession and the weak recovery during the last decade are responsible for creating an estimated housing shortage of approximately 3.5 million homes at the start of the 2020 decade.
- Boomers and Millennials on the move: During the 2020s, the two largest demographic groups will need and want to change housing accommodations. Baby Boomers who postponed their relocation during the last decade are the retiring empty nesters entering their last stage of housing demand. And Millennials are finally having families and embracing a suburban, single-family lifestyle. In addition, the front end of Generation Z (Zoomers) is entering the rental housing market. This wave of housing demand began in the second half of 2019, when the 30-year mortgage interest rate dropped to historical lows under 4%. Builders began 2020 with strong backlogs of sales and demand.
Housing Industry Performance Analysis
We recently released the 2021 Home Builders Comparative Financial and Operational Analysis. The analysis is a representative sample of responses from companies involved with Builder Partnerships’ rebate program, Home Builder University training programs, and clients of Shinn Consulting. Participants are private home builders geographically dispersed throughout the U.S. and Canada. Among them, the average sales volume for 2021 was $94 million, with a range from $1 million to over $600 million. Nearly one-third (30%) of these builders reported revenue of more than $100 million.
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