Profit Margin Study

A recent study tackling the cost of doing business in home building uses survey data to create "profitability benchmarks" for the industry.

The National Association of Home Builders' study for 2019 shows that profit margins are ticking up, hitting a 13-year high. Builders reported average revenue of $16.4 million for fiscal year 2017. Breaking out the data, $13.3 million was spent on cost of sales including land, and direct and indirect construction costs, and $1.9 million was spent on operating expenses. The average profit margin in 2017 was 19 percent, with a 7.6 percent net profit margin.

In 2006, builders’ average gross margin stood at 20.8 percent. Then came a painful housing recession that drove it to 14.4 percent in 2008. Gross margins have recovered slowly but steadily since then, climbing to 15.3 percent in 2010, 17.4 percent in 2012, 18.9 percent in 2014, and most recently, 19.0 percent in 2017. Meanwhile, their average net profit margin sank from 7.7 percent in 2006 to -3.0 percent in 2008, got a pulse in 2010 (0.5 percent), and made significant gains in 2012 (4.9 percent), 2014 (6.4 percent), and in 2017 (7.6 percent) is essentially back to 2006 levels.

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