CHANGES THE U.S. CENSUS BUREAU made to the way it classifies residential construction companies helped the 2002 Economic Census data, released at the end of July, reveal several trends in home building.
A new set of data has been released every five years since the economic census began in 1967. Prior to 1997, home builders were separated into single-family general contractors and multifamily general contractors, which both build on the owners' lots, and operative builders, who build on land they own. In 1997, the Census Bureau shifted its classifications, grouping home builders into two categories, single-family and multifamily builders. With input from the NAHB, the bureau once again refined its definitions for 2002, this time separating the field into four categories: new single-family construction, new multifamily construction, operative builders, and residential remodelers.
The new categories were a bit rough at the edges, leading the bureau to revise the data it had collected for operative builders, new single-family builders, and residential remodelers. The original data overstated the number of single-family builders (also known as general contractors) and understated the numbers of operative builders and remodelers, says NAHB economist Michael Carliner.
According to the final data released in July, in 2002 there were 26,043 operative builder establishments, 58,472 single-family general contractors, 4,397 multifamily general contractors, and 82,747 residential remodelers. The operative builder figure is up from the NAHB's estimate of 21,000 in 1997 and 16,989 as reported in the 1992 economic census. (The Census Bureau reports establishments, not companies; one company may operate multiple establishments, defined as “a relatively permanent office ... established for the management of more than one project or job.”)
That growth is in line with a trend the NAHB has tracked during the last 15 years. “Around 1990, less than 60 percent of the new single-family homes were sold with house and land together. Now it's 76 percent,” Carliner says.
Among the other noteworthy statistics contained in the data is the share of their businesses that operative builders and single-family general contractors spend on payroll for their construction workers. As a percentage of their value of construction work, single-family contractors spent 7.3 percent to pay their construction workers; operative builders, which tend to subcontract out most construction activities and therefore have fewer construction workers on their rolls, spent just 2.9 percent.
KEEPING THE PACE: Total housing starts continued along a strong path toward another record-breaking year, down just 0.2% from June due to a 3.2% drop in multifamily starts.
TICKING UP: The Federal Reserve's campaign to raise its federal funds target helped push one-year ARM rates higher in August. Fixed rates remained below 6%.
OPPOSITE DIRECTIONS: For the second straight month, the overall index improved, while buying conditions for houses fell. More people said they can't afford to buy.
WILD RIDE: The volatile pattern of regional starts continued in July. After falling in June, the Midwest and West posted gains. The West remained well below its levels of a year earlier.
RESALE FEVER: The price of existing homes shot higher in June, up 14.7% over a year earlier. Uncharacteristically, new-home prices dipped below resale.
BUY, BUY, BUY: The blistering pace of new-home sales continued in June, as sales were up 14% over June 2004. Midwest sales have surged, up 24.2% year-over-year.
SINGLE STRENGTH: Building permits rose again in July, thanks to growth in permits for single-family homes and small multifamily buildings.
DOWN AGAIN: Builders' optimism declined again in August, as they felt less positive about both present sales and buyer traffic. Sentiment fell everywhere but the Northeast.
WOOD SAVINGS: Prices for both structural panels and framing lumber fell in August. A price war among big-box retailers may help demand for OSB.