Writes the US National Association of Home Builders (NAHB) Friday, typically, one of the best-kept secrets in a private company is the share of total revenue that stays in the company after paying all operating costs and expenses – also known as net profit margin. NAHB periodically conducts the Builders’ Cost of Doing Business Study – a nationwide survey of single-family home building companies designed to produce profitability benchmarks for the industry.
Read our previous release on this subject: US Existing Home Sales: February 2019.
The 2019 edition of the NAHB study, released Friday, shows that profit margins for US home builders have continued to increase, reaching their highest point since 2006.
On average, builders reported US$16.4 million in revenue for fiscal year 2017, of which $13.3 million, or 81%, was spent on cost of sales and another US$1.9 million, or 11%, on operating expenses.
As a result, the industry average gross profit margin for 2017 was 19%, while the average net profit margin reached 7.6%.
Looking back shows that, on average, builders’ balance sheets have shrunk since 2006. That year, builders reported an average of US$13 million in total assets.
But by 2010, average assets had been cut in half, down to US$6.2 million.
In 2012 and 2014, assets regained some lost ground, up to US$8.9 million and US$9.2 million, respectively, before falling slightly again in 2017, to US$8 million.