The Association of Professional Builders (APB), a business coaching service for custom home builders, with members in the U.S, Canada, Australia and New Zealand, announced the findings from its annual State of Residential Construction Industry (SORCI) Report for 2022.
The research report, compiled annually, surveys hundreds of residential home builders operating in the United States, Canada, Australia, and New Zealand. The sponsors for this report include Buildertrend, CBUSA, Buildxact, Xact Accounting and Builda Price.
What are the key findings of APB’s survey?
Key findings in the 2022 SORCI report for the United States:
- A sharp rise in the cost of materials, in particular, with lumber prices increasing as much as 142 percent as a result of increased demand and supply chain distributions.
- A surge in home building demand fueled by record low interest rates and raised disposable income among consumers unable to spend their money on overseas vacations.
- At the start of 2022, inflation had hit 7% in the U.S. This trend is to continue upwards until interest rates are increased, at which point demand for new homes may start to drop.
Despite the supply chain disruptions, increased demand and inflation, builders in the United States protected their margins by using allowances for lumber from mid-2020 onwards.
The SORCI Report indicated that 49.1% of builders know their fixed expenses per job, per day, an increase from 43.1% the year prior. The report also revealed that the industry is continuing to become more systemized and more professional year over year.
Professional builders continue to implement new ideas and structures that enable them to become better operators and deliver a better experience for their clients, with 37% of building companies investing more in training during 2021 than what they invested in 2020.
What are residential builders’ expectations for 2022?
Builders are looking ahead to 2022 with confidence with 46.8% of all builders surveyed intending to surpass $120,000 in annual salary. It’s important to note that these figures all relate to owners’ drawings and do not include any retained profits left in the company.
“While residential home builders faced many tests this past year, their resilience is to be applauded,” said Erik Cofield, U.S. Exec Business Coach, Association of Professional Builders.
“Residential Home Builders have been willing to invest in their education to systemize their business processes. And this in turn has enabled them to forecast employment and schedule revenue more accurately, which has resulted in increased profit margins.”
What were the order rates for the industry?
More than 700 builders participated in the survey to provide deeper insights into the residential construction industry. Data revealed that 55.7% of survey participants signed more contracts in 2021 than 2020. 71% of builders take on less than 13 projects a year.
Additionally, 63.9% of U.S. builders take on less than 13 projects and 36.1% take on more than 13 projects per year, which is significantly more than other countries. An important consideration is that more builders in the U.S tended to focus on smaller projects with an average contract value falling between $100k – $299,999 compared to Australian builders.
“We always look forward to the opportunity to survey the residential homebuilding community. Our annual SORCI report not only provides key data points that help show us where the industry is headed, but also allow us to adapt our offerings to the needs of the residential home builders we have the opportunity to work with daily,” said Russ Stephens.
“We look forward to helping residential home builders we haven’t yet worked on how to better systemize their businesses, grow margins, sales revenue and transform this industry.”
With professional builders running more concurrent projects than ever before in 2021, the report indicated that builders were utilizing dedicated project management software to manage the process. In 2021, 30.3% of U.S.-based home builders used Buildertrend.
Other findings include:
- 74.6% of U.S.-based home builders don”t have a plan covering the next 3 years.
- 51.6% of builders in the United States delivered their projects on time in 2021.
- 46.7% of U.S.-based builders said getting quality leads is the biggest marketing challenge.
- 40.2% of builders in the U.S paid themselves $60K – $120K in total drawings in 2021.
The report dives into trends in sales, contracts, social media, marketing in the industry. Data from the report covered insights from residential builders for lead generation, team building, project management, planning, owner’s remuneration, financials and self-development.
What is APB’S work in the industry?
APB has worked with thousands of builders, coaching residential building companies to systemize their business, including Rick Champlin of Simple Group based in Utah.
“One of the main reasons we joined APB was to improve our margins, have accountability, and not reinvent the wheel. One of the first things we did was look at our accounting. We were able to figure out why our reports weren’t accurate and then fix our accounting systems so that we could quickly pull reports, which had been a big problem,” Champlin said.
“We used APB’s “Pricing For Profit’ model with our KPI spreadsheet to know our overhead numbers and made sure they were added to pricing to raise the net profit on our jobs.”
To find out more about the state of the residential construction industry, a PDF of the report can be downloaded at https://go.associationofprofessionalbuilders.com/sorci-download.