Structure of the Home Building Sector

With respect to remodelling, 84 percent of residential remodelers did less than $1 million in annual business. Courtesy of Hanley Wood, LLC

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 percent of all home building establishments had annual receipts under $1 million in 2007. Another 31 percent had receipts between $1 million and $10 million. Only 4 percent 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 percent had receipts over $10 million.

The share of the market due to the top 10 home building firms peaked at 28 percent in 2006 and fell to 24 percent 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 percent, but that was because new firms added 13.4 percent to the total and 11.1 percent of the existing firms went out of business.

- Courtesy of NAHB