Over the course of my 53-year career, it has been interesting to study the profile of the typical homebuilder in America, because in that half-century, his or her metrics have not changed very much. Despite the growth trajectory of the major, national homebuilders who are most often publicly traded, the average homebuilder is still a small business.
It is helpful to first understand what role new home construction plays in the overall Gross Domestic Product, or GDP, of the American economy. Home building is called “residential fixed investment,” or RFI, and contributes approximately 4.1 percent of U.S. GDP as of the first quarter of 2025, which translates to a dollar value of about $1.216 trillion on a seasonally adjusted annual basis. RFI is defined as the part of GDP that consists of the purchases of private residential structures and residential equipment that is owned by landlords and rented to tenants. This includes the construction of new single-family and multi-family homes, residential remodeling and improvements, manufactured homes, brokers’ commissions on sales, and expenditures on equipment intended for rental housing.
The broader housing sector, including both home building, or RFI, and housing services such as rents and imputed rent, makes up about 16.4 percent of overall GDP, with housing services accounting for an additional $3.691 trillion. During economic expansions, especially housing booms, RFI can approach or exceed 5 percent of GDP, pushing the total housing share above 17 percent. During recessions or industry pullbacks, RFI often dips below its historical average (e.g., post-2008-2012). The housing share of GDP peaked at 17.8 percent in Q2 2020, driven largely by a surge in residential activity during the Covid-19 pandemic. So overall, while the total housing share remains historically significant, the actual figures oscillate with market cycles, underlying demographics and broader economic conditions.
Within the subset of new home construction, the National Association of Homebuilders recently released its annual survey of its membership profile, and it really hasn’t changed in decades. In 2024, 35 percent of NAHB’s membership was comprised of builder members, single-family and multifamily builders, residential and commercial remodelers, commercial builders, land developers, and manufacturers of modular/panelized/log homes. The remaining 65 percent were associate members, or those involved in support industry and professions, such as trade contractors, manufacturers, retailers/distributors, designers, and architects.
STATIC TRADITION
The typical builder runs a small business. The median number of homes NAHB builders started in 2024 was six, and this figure has remained unchanged since 2021. Among builders the association surveyed for last year’s activity, 10 percent started one unit; 21 percent (the plurality) started two or three units; 11 percent started four or four; 14 percent started six to 10; 13 percent started 11 to 25; 12 percent started 26 to 99; 7 percent started 100 to 499; and, 4 percent started 500 homes or more. Rounding out the latest profile, 8 percent of NAHB members indicated that they did not start any homes in 2024.
Most builders earned less than $5 million in total revenue in 2024: 13 percent reported a dollar volume of less than $500,000; 12 percent reported between $500,000 and $999,999; 35 percent (plurality) between $1.0 and $4.9 million; 15 percent between $5.0 and $9.9 million; 7 percent between $10.0 million and $14.9 million; and, 16 percent reported $15.0 million or more. The median revenue edged up to $3.7 million, an 8 percent increase from 2023. For comparison, the Small Business Administration’s size standards classify residential builders and remodelers as small if they have average annual receipts of $45.0 million or less ($34.0 million or less for land developers). And the typical NAHB builder member had six employees on their payroll in 2024, unchanged from 2023. Due to their status as small businesses and extensive use of subcontractors, many builders carry relatively few employees on their payrolls.
The D.R. Hortons and Lennar Corporations are examples of the large-scale home builders, yet they didn’t exist a couple of decades ago. While they have many peers, just those two companies exceed $33 billion in revenue each. But despite that reach, homebuilding in America is still largely a mom-and-pop industry, and critical in facing our country’s housing needs. There is no doubt this industry is massive and plays a major role in America’s overall economy.
Pierre G. Villere serves as president and senior managing partner of Allen-Villere Partners, an investment banking firm with a national practice in the construction materials industry that specializes in mergers & acquisitions. He has a career spanning almost five decades, and volunteers his time to educating the industry as a regular columnist in publications and through presentations at numerous industry events. Contact Pierre via email at pvillere@allenvillere.com. Follow him on Twitter – @allenvillere.