The home building industry consists of companies that are primarily engaged in the construction of privately owned homes. These companies build new houses designed for home buyers – which typically constitutes the vast majority of their total business – and they also provide financial services to their customers, including insurance products, title services and mortgage banking services such as loan originations. Below is current consensus forecast data on unit economics such as orders, backlog and home deliveries; financials, including revenue and home and land inventory; and key ratios, such as profitability and backlog conversions rates. These key home building metrics aid market participants in identifying home building industry trends and future performance of home building companies, such as D.R. Horton, Lennar Corporation and Meritage Homes Corporation. View all Home Building Resources >
What are the most important home building KPIs?
Key performance indicators (KPIs) are the most important business metrics for a particular industry and are where investors should look to find an investment edge. When understanding market expectations for the home builder industry, whether at a company or industry level, here are some of the home building KPIs to consider:
- Net New Orders
- Homes Closed/Delivered
- Average Selling Price (ASP)
- Backlog Conversion Rate
- Absorption Rate/Contracts Per Community
What questions do these key home building metrics answer?
With Visible Alpha’s home building forecast data, you can discover:
- Which home building companies are booking the most new orders?
- Which home building companies are expected to deliver the most new homes compared to the previous year?
- Which home building companies are selling the most expensive homes?
- Which home building company has the largest backlog of deliveries this year?
- Which home building company is expected to add the most new companies in the next two years?
How can this data be used?
By opening up forecast data on key home building KPIs, Visible Alpha is enabling institutional investors, retail investors, business reporters, students and more to quantify and compare market expectations for companies across the home builders industry.
How do I attribute Visible Alpha?
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Explore the key performance indicators for the airline industry and where investors should look to find an investment edge. In this guide:
- Home building industry business model overview and diagram
- Key home building metrics PLUS Visible Alpha’s Standardized Industry Metrics
- Available comp tables for company comparison
- Industry terms and definitions
Home is defined as a single-family residence and includes attached and detached single-family residential homes.
Absorption Rate/Contracts Per Community
Absorption rate is the number of net new home orders divided by average sales locations. In the U.K., contracts per community are also known as sales per site.
Backlog consists of homes sold under sales contracts not yet delivered to customers. U.K. home builders use the term “order book” instead of backlog.
Homes Closed (homes delivered)
Homes closed, or homes delivered, represents the homes delivered to the customers since the project opened.
Average Selling Price
Average selling price of the homes delivered, calculated as revenue divided by homes delivered.
Average Backlog Price
Average backlog price is derived using backlog volume divided by backlog value.
Average Order Price
Average order price using net new orders divided by order value
Backlog Conversion Rate
Backlog conversion rate represents the number of homes delivered/closed in a given period divided by the backlog at the beginning of the period. The majority of analysts use volume as the base when computing the backlog conversion rate. Alternatively, this can be calculated as realized revenue divided by the backlog.
Cancellation rate of booked homes for the period can be derived as number of canceled units by gross orders.
Net New Orders
Net new orders consist of homes sold under sales contracts minus the cancellation of homes booked for the period. U.K. home builders use the term “reservations” instead of net new orders.
A community is a single development in which new homes are constructed as part of an integrated plan. Community count denotes the number of communities that have opened for home sales. In the U.K., home builders use the term “sites” rather than communities.
Housing associations in England are independent societies, bodies of trustees or companies established to provide low-cost social housing on a non-profit-making basis.
The private housing sector or non-social housing sector (i.e., owner-occupied household space and those rented privately), including those that go with a job or business and those not owned by housing associations
Affordable housing is social rented, affordable rented and intermediate housing for eligible households, which is determined by local incomes and local house prices. Local authorities and private registered providers own social rented housing.
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