February 26, 2012

"The Other Two-Thirds"

In today's blog we will bring to you a guest blogger, one who will highlight for those who may not understand what the make up of our Federation is truly all about. I'm talking about the much needed inclusion of associate members. Today's guest blogger is Dr. David Crowe, Chief Economist and Senior Vice President at the National Association of Home Builders (NAHB).   Dr. Crowe is responsible for NAHB’s forecast of housing and economic trends, survey research and analysis of the home building industry and consumer preferences as well as micro-economic analysis of government policies that affect housing. 

While some may say that this is a builders association most would agree that it is a builders association that needs the entire building industry's involvement. There are associations designed for such disciplines as the title companies, lumbers companies, bankers and the like but the National Association of Home Builders is where I give my true commitment because "if it affects builders it will affect associates" and without the work of NAHB's volunteers and staff, there probably won't be a need, at least not where housing is concerned, for the "other" associations. 

click here to read the rriginal article reprinted from BuilderOnline.com

The Other Two-Thirds

"The home building industry is more than just builders."

by Dr. David Crowe, NAHB Chief Economist

Dr. Crowe
Home building is supported by one of the largest, most diverse collection of businesses in the country. The NAHB categorizes the two-thirds of its members who supply builders as “associates.” But without these businesses, without their products, services, and people, no homes would be built. And, like home builders, the companies that comprise the supply chain range from large national giants to small local businesses.
Traditionally, home building has been a major contributor to recovery employment and a significant share of the boost comes from associates. The NAHB estimates that for every 1,000 single-family homes built, 3,000 jobs are created. Half of those jobs and 43 percent of the income generated are on-site construction jobs such as framers, electricians, plumbers, sheet rock installers, and the many other subcontractors that are needed to complete a home. Nearly half of the NAHB associate members are subcontractors or specialty trades. Subcontractor and specialty trade companies are small with a median payroll of seven and annual gross receipts in 2010 of $720,000.
Top subcontracting specialties in the NAHB associate membership include plumbing and heating and air conditioning, electrical, carpentry, and masonry and plastering. One-third of hard construction costs are framing and trusses, excavation and foundation, plumbing, HVAC, and electrical wiring.
The other half of jobs generated by home building are off site and include retail, wholesale, manufacturing, and professional services. Retail and wholesale companies account for 16 percent of associate members and provide builders and their subcontractors with their appliances, flooring, wall coverings, cabinetry, and building materials. The retail and wholesale job impact accounts for 14 percent of the job creation, or over 400 jobs for every 1,000 homes built. The retail and wholesale businesses tend to be some of the larger companies within the NAHB. Median payroll size is 14 and annual gross receipts are $2 million.
Manufacturing the items placed in a new home accounts for nearly 500 jobs for every 1,000 homes built and 16 percent of the total income generated in building a home. Manufacturers represent a relatively small portion of associate members but that may be because they depend upon the wholesaler and retailer outlets to represent them at the local level and because single companies represent large amounts of output. The vast majority of exhibitors at the International Builders’ Show are manufacturers.
Professional services members, including financial and insurance companies, comprise one-fifth of the associate members and the same share of jobs created from building homes. Collectively, the professional, financial, and insurance industries account for a quarter of the total income generated by home building because many of these services require experience, education, and involve accepting risks. Professional services companies are similar in size to subcontractors with a median payroll of seven and annual gross revenue of $770,000 while financial and insurance companies are larger with a median payroll size of 12 and annual gross revenue over $5 million.
Typical retail, wholesale, and financial service associate members have been members for as long as the typical builder member (10 years) but subcontractors and professional service companies have shorter tenures (six and seven years respectively). Home building firms are predominantly male-headed with only 7 percent headed by a female. Associate members are more diverse stretching from over one-quarter female-headed professional and financial businesses to 16 percent of the wholesale/retail companies to 12 percent of the subcontractors headed by a female.
While the stylized model of the home building industry may be the small local firm building a couple dozen homes a year, the force behind that business is a massive collection of strong, competitive, and diverse businesses supplying and supporting an industry integral to the U.S. economy and home buyer.
NOTE: Dr. Crowe is also responsible for the development and implementation of an innovative model of the local economic impact and fiscal cost of new home construction, which has estimated the net impact of new housing in over 500 local markets.  Past research has concentrated on home ownership trends, tax issues, demographics, government mortgage insurance, local land use ordinance impacts and the impacts of housing on local economies. 
Before becoming NAHB’s Chief Economist, Dr. Crowe was NAHB’s Senior Vice President for Regulatory and Housing Policy.  Prior to NAHB, Dr. Crowe was Deputy Director of the Division of Housing and Demographic Analysis at the U.S. Department of Housing and Urban Development. 
He has served on federal advisory committees to the Census Bureau and to the U.S. Department of Housing and Urban Development. 
Dr. Crowe holds a PhD in Economics from the University of Kentucky.

Submitted by:
Michael Kurpiel, CGA, CGP


Monica Sommerfeldt Lewis said...

Thank you Mr. Crowe. This is an excellent article about all the members and businesses that are involved in building a house AND making our Federation strong.

Vernon Hoffman said...

It is interesting to read the statistics of how many different organizations are involved in the building of a home. I have realized for quite awhile how much impact the home building industry has upon our local and national economies. Great article.

Anonymous said...

It's great to read about our associate members from someone other than associates, particularly someone as esteemed as Dr. Crowe. I hope that all those who think that associates are a necessary evil read this article and really get it.

Thank you Dr. Crowe for writing this piece and thank you Mike Kurpiel for posting it on your blog!

Anonymous said...

Interesting Mr. Crowe. Sadly, in a relatively small town with a very active HBA if you are not the cheapest, membership will not gain you increased business. Having been a member for 20 years I know what I'm talking about.

Anonymous said...

The building industry can lead our nation back out of this recession and depressed economy. Within our industry we have many small and medium sized businesses that add to the growth of our industry. The administration in power needs to realizes the huge potential there is for growth. They should begin to utilize the industry as a spearhead to get back on an economic recovery. Like Mr. Crowe points out there is a diversity of businesses in our association that affect many facets within our economy as a whole.