A stronger economy and improvements in housing demand will support industry growth
Los Angeles, CA (PRWEB) November 11, 2013
Homeownership is the cornerstone of the American Dream, with housing typically accounting for the largest percentage of individual wealth in the United States. Housing investment is also crucial for the US economy because it influences the pace of general economic growth and provides an important fiscal and monetary policy connection between governments and households. Consequently, revenue for the Home Builders industry traditionally fluctuates with economic cycles.
In the five years to 2013, revenue is estimated to have fallen by an average annual rate of 2.5% to $75.1 billion. According to IBISWorld Industry Analyst Jeremy Edwards, “During this period, the industry struggled through a momentous downturn in the housing market, stemming from the subprime mortgage crisis, the burst of the real estate bubble and the collapse of credit markets.” Additionally, as new construction projects slowed, so did the need for new employees; over the five years to 2013, employment is estimated to fall at an average annual rate of 3.2% to 385,664 workers.
“The majority of employees are hired on a contract or per-project basis, which has exacerbated this trend,” says Edwards. The US government provided some reprieve for home builders, however, including the passing of a number of acts to combat plummeting housing prices and demand. For example, the US government implemented the Housing Assistance Tax Act (HATA) in 2008, which provided tax credits to first-home buyers.
In 2013, revenue for the Home Builders industry is expected to rebound as industry activity picks back up; revenue for the year is forecast to increase 13.7%. This trend is forecast to continue over the five years to 2018. Even with this expected growth, industry revenue would still fall short of its prerecession peak, as the collapse of the real estate market continues to reverberate throughout the industry. Still, improvements in the general economy will support industry growth, following the cyclical pattern of boom-and-bust that typifies traditional economic cycles. Additionally, industry profit margins will expand due to improvements in housing demand, lending activity and real estate values.
The Home Builders industry is characterized by a large number of small-scale establishments that service relatively narrow, geographically dispersed markets. The industry also contains a large number of subcontractors that operate as sole-proprietors or partnerships and hire no additional employees.
Over the past five years, the level of market share concentration has decreased. The collapse of property prices during the past five years hurt large businesses who were highly invested in the market. In addition, the industry experienced a greater number of subcontractors operating because consistent work was unavailable. Subdued demand for industry services resulted in firms taking on less full-time staff as a precaution against inconsistent work flows. The hiring of subcontractors has been looked upon favorably because businesses are not required to pay wages while demand is low and workers are not required.
For more information, visit IBISWorld’s Home Builders in the US industry report page.
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IBISWorld industry Report Key Topics
Firms in the Home Builders industry primarily construct single-family homes, where units are separated by ground-to-roof walls and have no units above or below. The industry also includes remodeling of houses and other residential buildings. Industry operators are general contractors, design-build firms and single-family construction management firms acting as general contractors and builders. The industry does not include speculative builders or contractors that build on their own account for sale.
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