The US homebuilding market is set to grow in 2025, but the way homes are being built and the types of buyers involved are changing. Instead of large, customized homes, builders are focusing more on smaller, affordable houses aimed at first-time buyers.
Chadd Folkes, CEO of Risksmith Residential Solutions, says younger buyers want homes that are affordable, ready to move into, and easy to get. This is causing builders to shift from custom, made-to-order homes toward simpler, repeat designs. Builders now often use a handful of home models repeated across developments, similar to an older “tract builder” approach.
This change helps builders finish homes faster and at lower costs. Smaller homes mean less risk of big losses and often have less fire exposure. Faster construction also means money isn’t tied up for as long, which is vital when supply chains and labor are stretched thin.
On the insurance side, this shift brings new challenges and opportunities. Pre-fabricated parts are becoming more common, which can reduce risks related to varying materials and make replacements easier. Shorter build times mean less chance of damage from bad weather. However, storing materials securely and managing transport risks have become bigger concerns. Folkes warns builders not to rush projects too much, as moving too fast can lead to accidents, like fires caused by temporary heaters used to dry walls.
Market conditions also affect builder risks. When the economy slows, homes often sit unsold longer. Insurance coverage usually lasts until the home sells, often no longer than six months. Builders and insurers prefer to keep unsold inventory low, because empty homes are vulnerable to damage, theft, or vandalism—especially in places prone to natural disasters like Florida.
Rising homeowner insurance costs in states at high risk for natural events, such as California and Florida, are pushing both buyers and builders to look at states with lower risks and cheaper insurance. This benefits areas in the Midwest, South, and interior West. These regions offer smaller, standardized homes with less risk of severe weather, which insurers find easier to price fairly.
For insurance brokers, understanding these changes is important. Folkes emphasizes that builder’s risk insurance isn’t a one-size-fits-all product. It requires careful underwriting and expert advice to match coverage with the unique challenges builders face today.
Risksmith Residential Solutions works with top insurers to offer tailored solutions for residential builders facing these shifts. Their approach helps both insurers and builders better manage risks in this evolving market.