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Report Reveals Solutions for U.S. Residential Builders During an Inflation Period


The Association of Professional Builders, a business coaching service for custom home builders, with members in the United States, Canada, Australia and New Zealand, announced March 28 the findings from its annual State of Residential Construction Industry (SORCI) Report for 2022. The report, compiled annually, surveys hundreds of residential home builders operating in the United States, Canada, Australia and New Zealand.

    

Key findings in the 2022 SORCI report for the United States indicated a sharp rise in the cost of materials, in particular, with lumber prices increasing as much as 142% as a result of increased demand and supply chain distributions. Another finding is the surge in home building demand fueled by record low interest rates and increased disposable income among consumers who were unable to spend their money on overseas vacations and entertainment. And finally, at the start of 2022, inflation had hit 7% in the United States. This trend is likely to continue upward until interest rates are increased, at which point it is likely that 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 onward. The SORCI Report indicated that 49.1% of builders know their fixed expenses per job, per day, up from 43.1% the year prior.

    

The SORCI 2022 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.

    

Builders are looking ahead to 2022 with confidence with almost half (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.

    

More than 700 builders globally participated in the survey to provide deeper insights into the residential construction industry. Data from the report also revealed that 55.7% of U.S.–based survey participants signed more contracts in 2021 than 2020. From all countries, 71% of builders take on less than 13 projects a year. Additionally, 63.9% of U.S. builders take on fewer than 13 projects, and 36.1% take on more than 13 projects per year, which is significantly more than other countries. An important consideration however, is that more builders in the United States tended to focus on smaller projects with an average contract value falling between $100,000 and $299,999 compared to Australian builders.

    

Other findings include the following:


  • 74.6% of the U.S.–based home builders do not have a business plan covering the next three years.

  • 51.6% of builders in the United States delivered their projects on time in 2021.

  • 46.7% of the U.S.–based home builders recognize generating quality leads as their biggest marketing challenge.

  • 40.2% of builders in the United States paid themselves between $60,000 and $120,000 in total drawings in 2021.


To find out more about the state of the residential construction industry, a free PDF of the report can be downloaded from https://go.associationofprofessionalbuilders.com/sorci-download.

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