On average, builders reported $13.7 million in revenue for fiscal year 2020, of which $11.2 million (81.8%) was spent on cost of sales (i.e. land costs, direct and indirect construction costs) and another $1.5 million (11.2%) on operating expenses (i.e. finance, S&M, G&A, and owner’s compensation). As a result, builders averaged a gross profit margin of 18.2% and a net margin of 7.0%.

Builders’ average gross margin fell dramatically during the housing recession (from 20.8% in 2006 to 14.4.% in 2008), but then rose steadily through 2017 (19.0%) before edging lower in 2020 (18.2%). Similarly, builders’ average net margin plummeted between 2006 and 2008 (7.7% to -3.0%), gradually increased through 2017 (7.6%), and then slipped back in 2020 (7.0%).

It is important, however, to put the latest results in context of the circumstances and realities of the time. 2020 was not a normal year for any person or business in any part of the world, as the COVID-19 pandemic engulfed our lives and economy. Like most businesses in the US, many builders were forced to shut down operations for a period of time, reinvent processes to ensure safety, provide health training to workers, limit visits to model homes, and adapt to office staff working remotely. Builders in 2020 also had to quickly learn how to navigate the uncertainties of supply-chain disruptions that made many building materials significantly costlier and unavailable on-demand. And, as if those issues were not challenging enough, the industry’s chronic labor shortage worsened as fear of the virus spread among workers and subcontractors.

https://www.builderonline.com/data-analysis/nahb-builder-profit-margins-fall-amid-growing-balance-sheets_c