After years of a steady customer breakout among custom home builders, production builders, and remodeling contractors, significant shifts have occurred in the types of customers pro dealers are selling to, the 2005 PROSALES 100 survey reveals. Custom home builders, in particular, are beginning to lose ground as the de facto leading customer group among the PROSALES 100.

In last year's survey, custom builders accounted for a 37 percent average among survey respondents, while production builders and remodelers trailed at 27 and 9 percent, respectively. But in the span of only 12 months, production builders have cut that gap significantly, with 2005 survey respondents reporting a decrease in custom home builder share to 35 percent and a corresponding increase in production builder activity to 30 percent (see "Average Customer Base," page 90). Additionally, almost one-third of the PROSALES 100 (32 percent) are expecting additional significant changes in their customer bases over the next five years, with increases in production builder and remodeling activity cited most often by respondents.

"The bulk of the business is being done by production builders," says Joe Weber, vice president and general manager for 43-unit, Aurora, Ill.–based Alexander Lumber. "Yards located in the city enter into this factor," he explains, adding that more than half of Alexander's sales are currently generated from the company's nine yards in the Chicago-metro area, which cater primarily to production builders.

Even in areas like Oregon, traditionally lacking in big builder activity, pro dealers are beginning to sense a decrease in traditional custom home building as national builders extend their market reach. "There are more [builders] like Centex, D.R. Horton, and Lennar coming to our area and working this market," says Brad Pence, CEO of Salem, Ore.–based Keith Brown Building Materials, a pro dealer with 12 locations across Oregon and Northern California. "I definitely think that in general there is a shift from the six-to-eight-houses-per-year builder to the 50-or-more-house builder. It's already happening in our California markets."

As production builders wield their market strength, many dealers and specialty distributors anticipate a surge in remodeling accounts if new construction activity slows. While remodelers still only make up about 10 percent of the PROSALES 100's customer base, dealers like Pence expect that the remodeling market will become more vital to business over the next five years. "I don't know that we are actually out targeting remodelers to increase that market share, but I think that as the housing market slows down, generally remodeling picks up," he says.

Hammonton, N.J.–based Universal Supply is already witnessing that market trend, according to company president Jeff Umosella. "The remodeling market is growing in demand because New Jersey is a small state with 9 million people and production builders have very little land remaining to build on" he says. In addition to development restrictions and land scarcity holding back the big builders, Umosella predicts that tightening in the general economy will also send homeowner dollars toward the repair/ remodel market. "People will reinvest in their current home instead of looking to build new ones."