Builders’ Profit Margins Fall as Balance Sheets Grow

Economics
Published

Builders averaged a gross profit margin of 18.2% and a net profit margin of 7.0% in 2020, according to the latest NAHB Builders’ Cost of Doing Business Study. The nationwide survey of single-family builders revealed profitability benchmarks for the home building industry industry.

The study showed that, on average builders reported $13.7 million in revenue for fiscal year 2020, of which $11.2 million (81.8%) was spent on cost of sales (i.e. land costs, direct and indirect construction costs) and another $1.5 million (11.2%) on operating expenses (i.e. finance, sales and marketing, general and administrative expenses, and owner’s compensation).

Income Table

Builders’ profit margins declined in 2020 for the first time since 2008. It is important, however, to put the latest results in context of the circumstances and realities of the time.

As a result of the COVID-19 pandemic, 2020 was not a normal year for any person or business in any part of the world. Like most businesses in the U.S., many builders were forced to shut down operations for a period of time, reinvent processes to ensure safety, provide health training to workers, limit visits to model homes, and adapt to office staff working remotely.

Builders in 2020 also had to quickly learn how to navigate the uncertainties of supply-chain disruptions that made many building materials significantly costlier and unavailable on-demand. And, as if those issues were not challenging enough, the industry’s chronic labor shortage worsened as fear of the virus spread among workers and subcontractors.

Rose Quint, NAHB's assistant vice president for survey research, provides more analysis in this Eye on Housing blog post.

Subscribe to NAHBNow

Log in or create account to subscribe to notifications of new posts.

Log in to subscribe

Latest from NAHBNow

Membership

May 20, 2025

Why You Should Apply to Be the Next National Associate Chair

Applications to serve as the next National Associate Chair are now open through Sunday, July 13.

Legal | HBA

May 19, 2025

NAHB Weighs In on Whether an Association Can Sue on Behalf of Its Members

The Georgia Supreme Court recently heard a case whether a home builders association has “standing” - meaning the right to challenge the conduct of another party in court.

View all

Latest Economic News

Economics

May 20, 2025

Single-Family Home Size Trending Higher

An expected impact of the virus crisis was a need for more residential space, as people used homes for more purposes including work. Home size correspondingly increased in 2021 as interest rates reached historic lows. However, as interest rates increased in 2022 and 2023, and housing affordability worsened, the demand for home size has trended lower.

Economics

May 20, 2025

Slight Gains for Townhouse Construction

Townhouse construction expanded more than 2 percent on a year-over-year basis per data from the first quarter of 2025.

Economics

May 19, 2025

Flat Growth for Single-Family Built-for-Rent

Single-family built-for-rent construction posted flat growth on a year-over-year basis, as a higher cost of financing crowded out development activity.