NV Homes, Cameron Station
Wondering how builders make their money? Via Market Watch.
Question: Can you provide any idea of what the average home-builder gross profit is on a square-foot basis right now here in the Northeast? I was getting ready to start negotiating the purchase of a townhouse here and I know the builder has a mortgage on the home for $286,000. I am trying to buy the home for around $340,000, which I think equates to a $12 per square foot profit. Just wondering if that seems reasonable.
Answer: I cannot give you a precise number, but I can extrapolate one from data provided by the National Association of Home Builders.
The average net profit before taxes of a typical home-building company was 9% in 2006, the latest year for which figures are available. The average price is now $300,000, give or take a few pesos, and the average size is roughly 2,500 square feet.
Now, 9% of $300K is $27,000. Divide that by 2,500, and you come up with a profit of $10.80 per square foot.
Somehow, a few of them would do it as 'a matter of survival.'