Boom in residential home construction and renovation brought challenges for today’s home builders.
By Russ Stephens
While builders have seen record increases in revenue and net profit with homeowners seeking to improve their living environments because of the COVID-19 pandemic, 2022 predictions for the residential home building industry aren’t quite as positive.
More than 1,000 builders globally participated in the recent 2021 State of Residential Construction Industry (SORCI) report to provide deeper insights into the residential construction industry.
Data from the report revealed that 2020 was a bumper year with 46.5% of respondents globally signing more contracts than in 2019; and 50% more in the U.S. market report signing more contracts in 2020 than 2019. However, after signing a record number of fixed-price contracts, the report also found that many are not prepared for the ensuing squeeze on margins caused by the rise in material pricing and other factors.
The Pandemic Push
As an industry, we’re all still feeling the effects of the global pandemic. There has been a major boom in residential home construction and renovation but this has also brought on challenges for today’s home builders. This unprecedented demand isn’t sustainable and custom home builders will need to adapt. The owners and directors of medium-sized construction companies are looking to systematize the business, grow their margins and/or their sales revenue, and transform this industry.
We’d like to see a shift where consumers expect to pay for quotes and builders’ time, rather than pitting all builders against each other. The goal is to increase the number of professional builders in the industry, and in turn, it will improve the experience for both consumers and builders alike.
The Green Premium
Many consumers are still averse to paying premiums for a green home. There’s a lot of interest in green home building, but interest wanes a bit when people see that costs are higher. We will see a drive towards environmentally-friendly homes only in conjunction with legislation updating and improving as well. Consumers want green homes but they don’t want to pay for it, even though the longer-term benefits are there. There needs to be constant upgrades in legislation to improve the high initial costs, availability of green construction materials and funding for green buildings.
What the Homebuilding Process Should be
Residential home builders deserve to be earning more money for the service they are providing and consumers deserve a superior service than they currently receive. The problem is the difficulty of delivering world-class service on tiny margins, or without having the proper systems in place. To maximize the client experience and overcome these difficulties, companies like ours, The Association of Professional Builders (APB), help builders systemize their building companies. The result is an improved client experience leading to more demand. This allows an increase in margins and ultimately the ability to scale their businesses into desirable building companies that possess real value and can be sold as an asset.
“Residential home builders deserve to be earning more money for the service they are providing and consumers deserve a superior service than they currently receive.”
APB aims to see a shift where consumers expect to pay for quotes and builders’ time in return for more detailed and accurate information. According to our research, 80% of builders will go out of business in the next five years due to a lack of business skills and knowledge. And of those remaining companies, another 80% will fail in the following five years.
APB provides the systems, templates, and training; covering advertising, marketing, sales, pricing, and operations, to residential home builders. APB was established to create systemized residential building companies that would improve the industry. We have a clear vision to improve the construction industry for both builders and consumers.
Russ Stephens is the co-founder of The Association of Professional Builders, a leading coaching company for custom home builders.