Home Building Industry Births and Deaths

Every year the US Census Bureau releases data showing births and deaths of establishments by industry. An establishment is a physical location with payroll employees where business is conducted, so a large firm with offices in several locations is counted as several establishments.

Industries for which the Census Bureau calculates births and deaths include Residential Building Construction (which includes both home builders and remodelers), Land Subdivision and Specialty Trade Contractors (including both residential and nonresidential contractors).

Exhibit 1 displays home builder and remodeler births and deaths over time. It is important to note that even at its peak between 2005 and 2006, the home building industry experienced a considerable number of deaths (25,263). This shows that the industry was not immune to churn even when it was thriving.  However, the number of deaths accelerated significantly during the recession. For example from 2008 to 2009, home builder and remodelers deaths stood at 40,944 and births at 20,226. Considering the magnitude of the economic crisis, it is interesting and perhaps surprising that the home building industry was still able to produce approximately 20 thousand births each year during the recession.  It’s important to remember the definition of establishment.  If some home builders and remodelers moved to smaller or less expensive offices, the new offices would count as establishment births.

Births only started to outpace deaths again between 2011 and 2012. However, the number of births (23,808) between 2011 and 2012 was still well below the peak of 33,220 between 2005 and 2006.

Exhibit 1: Home Builder Births & Deaths, 2004-2012

Exhibit1

Exhibit 2 shows the net (births minus deaths) percentage change for home builders and remodelers, land developers, trade contractors, for all industries, and for manufacturers.

Compared to all industries, it is apparent that home builders and remodelers, as well as closely related industries, experienced more volatility over this time period. For example, while all industries only grew by 2 percent between 2005 and 2006, home builders and remodelers grew by 5 percent, land developers by 4 percent, and trade contractors by 4 percent. Furthermore, while all industries declined by 2 percent between 2008 and 2009, land developers declined by 17 percent, home builders and remodelers by 13 percent, and trade contractors by 9 percent. From 2011 to 2012, home builders and remodelers recovered somewhat. Home builders and remodelers expanded by 2 percent and trade contractors grew by 1 percent. However, the number of land developers contracted by 6 percent.

Manufacturers were added to this chart to show how the home building industry performed in comparison to another major industry. Manufacturers experienced net losses throughout this time period. It may be the case that more losses in the manufacturing industry were due to structural effects in comparison to the home building industry.

Exhibit 2: Net Industry Changes, 2004-2012

Exhibit2

 



1 reply

  1. What I found interesting was that in 2008 and 2009 their was still some births. It was not surprising to me of the number of births in 2005 and 2006. They were great years in real estate.

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