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Building Products in New Residential Construction: What, Where and Who

Special Studies June 1, 2020
By Paul Emrath, Ph.D.
NAHB Economics and Housing Policy Group
 

NAHB analysis of government data indicates that new single-family and multifamily construction used about $94.9 billion in building products in 2019. Although the vast majority of the $94.9 billion was produced domestically, supporting jobs in the U.S. manufacturing sector, about 6.4 percent ($6.1 billion) was imported from other countries. Although the domestic production was spread across the entire country, with several billion dollars produced in each of the upper Midwestern states, the largest amounts were manufactured in the populous states of Texas ($7.9 billion) and California ($6.9 billion).

Among the major product categories, new residential construction used more than $11 billion each of “cement and concrete products” and “architectural and structural metals” in 2019. If added together, the three categories of wood products (“sawn lumber and treated wood products,” “plywood and engineered wood products,” and “other wood products”) accounted for over $10 billion. Although it is relatively common for customers and subcontractors to have a role in choosing some building products, in nearly all cases studied by NAHB it was most often the builder him- or her-self who had the greatest influence over product selection.

The following sections explain these “what,” “where,” and “who” results in more detail.

What

For data on the products used in residential construction, NAHB relied primarily on the supply tables for the manufacturing sector in the Input-Output Accounts generated by the U.S. Bureau of Economic Analysis (BEA). The supply tables capture only the products used directly by an industry. To isolate the products used by particular segments of the construction industry—specifically, new single-family and multifamily construction—it is necessary to use the most detailed version of the tables, broken into over 400 industry and product categories. Because these tables are available only with a lag, NAHB adjusted them to 2019 levels using the changes in single-family and multifamily Residential Fixed Investment (RFI) in BEA’s National Income and Product Accounts. To make the results compatible with state-level data used in the next section, the product categories were aggregated slightly, up to the 4-digit categories in the North American Industry Classification System (NAICS). The result is shown in Table 1.

Table 1. Building Products Used Directly in New Single-family and Mulitfamily Construction: 2019

As the top of the table shows, in 2019 new residential construction used $11.7 billion of product category 3273 (cement and concrete products) and $11.2 billion of 3323 (architectural and structural metals). Architectural and structural metals is a fairly diverse category that includes, among other items, metal windows and doors, sheet metal ductwork, and rails and fencing.

After 3273 and 3323, new residential construction used $7.7 billion of 3241 (petroleum and coal products) and $7.0 billion of 3261 (plastic products). Category 3241 includes asphalt roofing and paving materials as well as any petroleum based fuels and lubricating products. Category 3261 includes plastic piping, plumbing fixtures and polystyrene foam insulation. For more detail on what’s included in each of the product categories in Table 1, please consult the official NAICS Code Drilldown Table.

Although individually accounting for smaller shares, when added together the three main categories of wood products (3211, 3212 and 3219) account for $10.1 billion of the products used in new residential construction. And this does not include the $5.4 billion in furniture and kitchen cabinets (product category 3371).

Where

In addition to supply tables, BEA’s input-output accounts include data on how much of the products used by various industries is imported. When applied to Table 1[1] , these data indicate that about $6.1 billion—roughly 6.4 percent—of the $94.9 billion in products used in new residential construction in 2019 was imported from other countries (the BEA data do not indicate which countries). The remaining 93.6 percent, $88.8 billion, was produced domestically, supporting jobs in the U.S. manufacturing sector.

NAHB used data on employment to break the $88.8 billion in domestic production down by state (Table 2). Most of the employment data NAHB used comes from the Quarterly Census of Employment and Wages (QCEW) produced by the U.S. Bureau of Labor Statistics (BLS). However, BLS suppresses some of the state-level data for confidentiality reasons. NAHB was able to fill in a few of the gaps with County Business Pattern (CBP) employment data from the U.S. Census Bureau. Although the CBP data are also sometimes suppressed, the suppression pattern is not identical to that in the QCEW, so in a few cases the CPB can supply state-level information not available from the QCEW.

Even so, there is a relatively small residual of $900 million in domestic production that cannot be assigned to a particular state. The remainder is distributed widely across the country, with 30 states accounting for over $1 billion in production each. The largest amount ($7.9 billion) was produced in the state of Texas. California was second (with $6.9 billion).

Texas and California are the two largest states in the country in terms of population, and there is a general tendency for the more populous states to appear toward the top of Table 2. The correlation is not perfect, however. A block of six contiguous states in or adjacent to the traditionally industrial upper Midwest—Ohio, Pennsylvania, Illinois, Michigan, Indiana and Wisconsin—appear in the top 10, even though Indiana and Wisconsin fall well out of the top 10 in terms of total population. Each of the top 10 states in Table 2 produced more than $3 billion of the building products used in new residential construction in 2019.

A larger table showing the breakdown of each of the 51 product categories listed in Table 1 according to the state in which it was produced is available in the “Additional Resources” box that appears at the top of the online version of this article.

Table 2. Location Where Building Products Used in New Residential Construction are Manufactured

Who

The process of purchasing building products can be somewhat complicated. Not only does building a home involve a large number of products, but different products may be purchased from various types of retailers or wholesalers, or even in some cases directly from the manufacturer. Moreover, building the typical single-family home requires 20 or more subcontractors, and the actual purchasing of various products may or may not be done by any subset of them. The customer or architect may also participate in choosing some products, especially (but not exclusively) in the case of custom homes built one at a time on the customer’s land.

This raises a natural question about who, in practice, actually decides which building products to purchase. To gather information on this, NAHB included a multi-part question in its February 2020 survey for the NAHB/Wells Fargo Housing Market Index. The survey asked the panel of single-family builders who has the greatest influence on the selection of 24 listed products. Options included the builder, subcontractor, customer, architect and dealer or supplier. Results are summarized in Figure 1.

Figure 1.  Who Has the Greatest Influence on Product Selection?

Most obvious tendency is that builders most often exert the greatest control over the selection of products—ranging more or less continuously from a low of 44 percent of the time for carpeting up to 88 percent of the time for house wrap. Carpeting is the only one of the listed items where some other entity (in this case, the customer) had the greatest influence on product selection more often than the builder, and this was by a very narrow margin (45 vs. 44 percent).

Seventeen of the 24 products are chosen primarily by the builder at least 60 percent of the time. The other 7 tend to be highly visible items are chosen relatively often by the customer: appliances (chosen primarily by the customer 47 percent of the time); lighting (46 percent); ceramic tile, carpeting and other flooring (45 percent each); countertops (41 percent) and plumbing fixtures (37 percent).

After builders and customers, subcontractors most often are the entities with the greatest influence on product selection. The five products chosen most often primarily by the subcontractor are hand & power tools (38 percent of the time) HVAC equipment (31 percent), electrical (28 percent), gypsum wallboard (26 percent), and paint (22 percent). In all five cases, builders are responsible for choosing the products 60 to 70 percent of the time—i.e., far more often than the subcontractors.

Examples of products chosen by some other entity a significant amount of the time are relatively minor. The only ones worth mentioning are the four categories of lumber products (sawn lumber, plywood & OSB, trusses, and engineered lumber & I-joists) that are chosen 11 or 12 percent of the time by the dealer or supplier.

Complete detail for each time appears in the full survey report available as a pdf file under “Additional Resources.” The report also contains alternate tabulations that include percentages of “NA” responses for builders who reported that they did not use a particular product. The effect of this is negligible, however, as all to nearly all builders reported using each product listed in the survey.

To summarize the results, Figure 2 shows the percentages of the various players who most often choose which building products to purchase, averaged over all 24 products in the survey. The figure illustrates the dominant role builders tend to play in the product selection process.

Figure 2.  Who Has  the Greatest Influence on Product Selection?

Summary and Conclusion

Using data from BEA, NAHB has shown that new single-family and multifamily construction used about $94.9 billion in building products in 2019. This includes only commodities produced by the manufacturing sector and those used directly in the process of new construction. For estimates that include indirect effects and services supplied by other sectors of the economy (for example, those engaged in transporting, storing and selling building materials), see the previous article on the National Impact of Home Building and Remodeling.

Using data from BLS and the Census Bureau to break down the results, NAHB has further shown that production of the commodities used in new residential construction is widespread across the country. Over $1 billion was produced in each of 30 different states (over $3 billion in each of 10 different states). The vast majority—$88.8 billion or 93.6 percent—of the $94.9 billion total was produced within the U.S., supporting jobs in the U.S. manufacturing sector. Nevertheless, the 6.4 percent ($6.1 billion) of building products that are imported can be important for filling in gaps in supply to sustain construction activity and prevent spikes in construction costs and housing prices from occurring.

The process of purchasing building products can be somewhat complicated, involving subcontractors and different links in the supply chain. However, irrespective of these details, NAHB survey results show that, in nearly all cases, it is the builder him- or her-self who is most often responsible for selecting the products that are ultimately purchased. This suggests that suppliers can often get the biggest bang for their advertising bucks by marketing their products directly to builders.

[1]To allow for the possibility that imports were increasing disproportionately to homebuilding, NAHB used 71-industry import tables to develop factors for imported commodities used by the construction industry overall through 2018, and residential fixed investment was used only to adjust the numbers from 2018 to 2019.

For more information about this item, please contact Paul Emrath at 800-368-5242 x8449 or via email at pemrath@nahb.org.


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