Private home builders are bold risk takers. For the level of financial risk they take, the financial returns—in terms of net profit—often don’t measure up. It doesn’t have to be this way. A case in point is that some private home builders make double-digit profits in any market, under any market conditions, with any product lines while their competitors struggle to reach a 5% profit margin, even in a boom cycle.
The barrier to profitability is predominately attitude. Most home builders don’t believe double-digit net profits are possible. They view external causes (such as their competition, a tight labor market, price increases for materials, etc.) as restrictions to profitability. They fight for every deal and become volume-oriented builders instead of profit-oriented builders.