Increased warranty demand will depend on the continuing recovery of the housing market
New York, NY (PRWEB) April 12, 2014
Firms in the Home Warranty Providers industry underwrite home warranty policies, which are designed to protect homeowners against the cost of repair or replacement of any structural component or appliance of a home. The industry's performance is closely linked with the number of home sales in the United States because policies are typically sold at the time of a residential purchase. Consequently, the industry was decimated by the onset of the recession and associated collapse of the US housing market. Industry revenue for the Home Warranty Providers industry experienced a long decline running through 2009 and 2010 as home sales continued to decline and consumer sentiment and incomes remained low.
Nonetheless, the industry began to recover in 2011 as the value of residential construction improved and home sales began to trend up. According to IBISWorld Industry Analyst, “Higher home sales and disposable incomes caused home warranty sales to rise, helping the industry recover from the depths of the recession.” Over the five years to 2014, the industry is projected to grow at an average annual rate of 2.4% to $2.0 billion. Revenue is forecast to rise at a stronger rate of 5.1% in 2014 as home sales accelerate, driving demand for industry products.
“Growth is expected to be stronger over the next five years as a more stable housing market benefits industry operators,” says Edwards. Following higher merger and acquisition activity over the past five years, the number of industry operators is expected to grow as higher profit margins attract existing diversified insurance providers to enter the market. Stronger home sales and a rising homeownership rate are forecast to boost industry profitability and revenue, while firms are also seeking new strategies such as online advertising to attract new customers.
The Home Warranty Providers industry has a moderate degree of market share concentration. The majority of firms operate on a regional or local basis. Over the past five years, the level of market share concentration has remained relatively stable. The industry has moderate barriers to entry that prevent new companies from entering as firms require capital to ensure the ability to make claim payments and adjustments. Additionally, the dismal state of the US housing market over the past five years has discouraged new players from entering the industry. Over the next five years, new players are expected to enter the industry, though, these firms will most likely be existing diversified insurance companies that extend operations to home warranties.
For more information, visit IBISWorld’s Home Warranty Providers in the US industry report page.
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IBISWorld industry Report Key Topics
The Home Warranty Providers industry underwrites (i.e. assuming the risk and assigning premiums) home warranty policies, which protect a homeowner against the cost of repair or replacement of any structural component or appliance of a home that is caused by normal wear and tear or a defect of a structural component or appliance.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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