New Research Details Structure of the Home Building Sector

NAHB Director of Economic Services Steve Melman has published a paper that details the structure of the residential construction sector. Using 2007 Economic Census and other data, Melman’s analysis reveals a dynamic sector dominated by small firms.  His findings include:

  • 65% of all home building establishments had annual receipts under $1 million in 2007. Another 31% had receipts between $1 million and $10 million. Only 4% of the establishments had receipts over $10 million. At an average new home price of $250,000, $10 million year would represent 40 home sales.
  • A significant portion of home building is done by other small businesses deployed as subcontractors. Three-quarters of the construction specialty trades companies had receipts under $1 million and 2.5% had receipts over $10 million.
  • The share of the market due to the top ten home building firms peaked at 28% in 2006 and fell to 24% by 2009. 
  • The net change in the number of home builders conceals much larger gross changes through births of new firms and deaths of old firms.  Between 2006 and 2007, the total number of businesses grew by 2.3%, but that was because new firms added 13.4% to the total and 11.1% of the existing firms went out of business.
  • With respect to remodelling, 84% of residential remodelers did less than $1 million in annual business.


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