What Has Happened to Builders’ Profit Levels?


Eye on Housing

Every couple of years, NAHB Economics asks single-family builders nationwide to provide data from their income statements and balance sheets so that industry-wide benchmarks on profit margins, asset and equity positions can be determined.  Results from the recently released Cost of Doing Business Study: 2014 Edition show that margins in 2012 improved over 2008 and 2010, but are still lower than in 2006.

Builders reported an average of $13.7 million in revenue for fiscal year 2012, of which $11.3 million (82.6%) was spent on cost of sales (i.e. land costs, direct and indirect construction costs), leaving them with a gross profit margin of 17.4%.  Operating expenses (i.e. finance, sales, marketing, general, and administrative expenses) took another $1.7 million (12.5%), and so in the end, builders posted an average net profit (before taxes) of $666,000, a 4.9% net profit margin.

Fig1

Builders’ average gross profit margin in 2012 (17.4%) was higher than…

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