SIC 5039
CONSTRUCTION MATERIALS, NOT ELSEWHERE CLASSIFIED



This industry comprises establishments engaged in the wholesale distribution of mobile homes and of construction materials that are not classified elsewhere. Some industry products are awnings, grain storage bins, and septic tanks. The industry also includes establishments primarily engaged in the wholesale distribution of mobile homes, prefabricated buildings, and glass. Establishments primarily engaged in selling construction materials to the general public are classified in SIC 5211: Lumber and Other Building Materials Dealers. Establishments primarily engaged in marketing heavy structural metal products are included in SIC 5051: Metals Service Centers and Offices.

NAICS Code(s)

444190 (Other Building Material Dealers)

421390 (Other Construction Material Wholesalers)

According to the U.S. Census Bureau, there were 2,922 establishments engaged in the wholesale distribution of mobile homes and of construction materials not classified elsewhere, with combined sales of $6.4 billion in 2003. The industry employed approximately 26,852 employees and they shared an annual income of $1.1 billion. The average sales per establishment totaled $1.6 million annually. California, Florida, and Texas led in the number of establishments, with 1,309 or almost 30 percent of the market. In addition, they employed some 6,715 people.

In 2003, the largest sector of the industry was construction materials, not elsewhere classified, with 911 establishments, representing more than 18 percent of the market, or $364.2 million in combined sales. Prefabricated structures numbered 808 establishments and more than 16 percent of the market, with sales totaling $656 million. Glass construction materials also controlled more than 16 percent of the market. Mobile homes accounted for about seven percent and $171.6 million in sales, and septic tanks had six percent of market sales.

Background and Development

Sales of the wholesale construction materials industry were dropping in early to mid-1990s, from $9.22 billion in 1992 to $6.9 billion in 1996. During the same period, the number of establishments in the industry dropped, from 4,049 in 1992 to 3,870 in 1996. Employment in the industry also declined from 36,978 in 1992 to 34,114 in 1996. The industry's payroll, however, grew slightly, from $970.9 million in 1992 to $1.02 billion in 1996.

As wholesalers of construction materials entered the 1990s, they faced economic challenges and changing industry conditions. Major retailers were growing in size and turning increasingly to direct purchasing and retail buying groups. Small building supply retailers were closing. This led to a diminished number of traditional wholesale customers, a situation reflected in the industry's dismal sales numbers in the mid-1990s.

A large portion of construction materials wholesalers' sales are generated by building supply retailers who operate a small number of stores. However, these are precisely the type of retailers who were being put out of business in the mid-1990s by building supply superstores such as Home Depot. Larger retailers—those with an annual sales volume of at least $50 million—were more likely to purchase directly from manufacturers.

Surviving wholesalers in this industry grew larger and were able to operate on lower profit margins. Industry analysts predicted that only those wholesalers able to offer value-added services would survive. Typical value-added services included inventory management, financing, training, ad development, and merchandising assistance.

Manufactured housing represented one portion of the industry experiencing growth in the mid-1990s, a dramatic reversal of fortune from the 1980s. Manufactured housing units are shipped from plants, either single wide or as single sections of multi-wide housing units. Some manufactured housing is not used for dwellings, but for light commercial use, classrooms, or clinics.

Manufactured home sales declined each year between 1983 and 1991 and were down to about 170,000 units in 1991. However, sales rose dramatically to 210,800 in 1992 and about 265,000 in 1993, increases of 23 and 26 percent, respectively. In 1994 the industry grew another nine percent to 290,000 units, jumping to over 375,000 in 1998, according to the Manufactured Housing Institute. In 1999, one out of every three pre-sold single-family homes was manufactured, and there were about ten publicly traded manufactured housing companies. In the first 11 months of 1999, production was up 5.2 percent (around 346,000 homes), compared to the previous year's 329,000. Because of zoning restrictions in major cities, manufactured homeowners and developers have focused on moving to rural areas.

Builders of traditional homes began diversifying into creating developments of manufactured homes in the mid-1990s. For example, Centex Corp., the largest-volume U.S. home builder, agreed to acquire Cavco Industries, Phoenix, a major manufactured housing company, in December 1996. Also, Pulte Home Corporation, another high-volume homebuilder in the United States, developed six manufactured housing communities in 1995 and 1996 and had plans to build more. Centex posted $10.36 billion for 2003, while Pulte Home Corporation recorded $9.0 billion. Other significant builders include D.R. Horton, KB Home, MDC Homes, Bowen Builders Group, and Ryland Homes

Current Conditions

The popularity of manufactured housing was spurred by the rising cost of traditional "stick" built homes and a dramatic improvement in manufactured housing quality, according to Builder magazine. A shortage of skilled trades people has made manufactured housing an attractive and cost effective means of developing lower-income communities, the magazine said. Today's manufactured houses are also larger and come with more features, resembling site-built houses but at a lower cost—50 to 60 percent less.

The Freedonia Group, Inc., an industrial market research firm, forecast the overall prefabricated and modular housing market to grow 1.7 percent annually into 2007. The findings were based on "cost advantages of factory production, such as bulk material purchasing and insulation from weather—related delays." Technology also played a significant role as the modular homes "closely resemble site—built houses." Further predictions included an annual 2.6 percent increase for multisection units until 2007.

Industry Leaders

While sales in the wholesale building material industry were declining, the largest players in the industry remained very large. All of these companies, however, have extensive interests outside of the industry. According to Builder, the leading ten manufactured home builders for 2003 were Champion Enterprise of Auburn Hills, Michigan; Fleetwood Enterprises of Riverside, California; Clayton Homes of Maryville, Tennessee; Oakwood Homes of Greensboro, North Carolina; Palm Harbor Homes of Addison, Texas; Skyline Corp. of Elkhart, Indiana; Cavalier Homes of Addison, Alabama; Patriot Homes of Elkhart, Indiana; Horton Homes of Eatonton, Georgia; and SE Homes of Addison, Alabama. Together, they shipped 101,981 thousand manufactured homes in 2003.

The modular whole—house panel builder leaders for 2003 included Champian Enterprises, All American Homes, Muncy Homes, New Era Building Systems, Excel Homes, Horton Homes, Ritz—Craft Corp., Clayton Homes, Palm Harbor Homes, and R—Anell Housing Group. Combined, they shared $3,722 million in sales.

Further Reading

Centex Corp, June 2004. Available from http://finance.yahoo.com/q/pr?s=ctx .

D&B Sales & Marketing Solutions, June 2004. Available from http://www.zapdata.com .

Hoover's Company Profiles, June 2004. Available from http://www.hoovers.com .

"Manufactured Home Builders Listing." Builder Online, June 2004. Available from http://www.builderonline.com/content/builder100/manf—home—listing—04.asp/sectionID=232 .

"Modular/Whole—House Panel Builders Listing." Builder Online, June 2004. Available from http://www.builderonline.com/content/builder100/modular—listing—04.asp?sectionID=233 .

Pulte Home Corporation, June 2004. Available from http://www.pulte.com .

U.S. Census Bureau. Statistics of U.S. Businesses 2001. Available from http://www.census.gov/epcd/susb/2001/us/US421420.HTM .

"US Prefabricated Housing Shipments to Reach 285,000 Units in 2007," 11 December 2003. Available from http://www.the—infoshop.com/press/fd16117_en.shtml .

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