Click here for the list of the top 50 markets.
Some familiar names are missing from our 2008 list of the top 10 builders in the top 50 markets. Kimball Hill disappeared from the list of the top 10 builders in Portland, Ore.; TOUSA, engaged in bankruptcy proceedings, dropped off the list of the top 10 builders in Jacksonville, Fla.; and Taylor Morley, a perennial powerhouse in St. Louis, disappeared after it shut down operations.
But as attrition winnowed the home building ranks, with more than 75 major builders either going bankrupt or simply closing their doors last year, new companies emerged as local market leaders, thanks to superior operating formulas, a marketing niche that’s right for the times, or just a little good luck. Four builders—Harbour Homes, Camwest Development, Wasatch Management & Development, and Premier Communities—are new to our list of the biggest builders in Seattle. Murray Franklyn, the sixth largest builder there, is betting on Seattle’s continued growth.
In Chicago, Lakewood Homes, which has been offering consulting services to other builders, and American Invsco, which built out a high-rise condo, dropped off the roster of local titans. That made room for Edward R. James Partners and The Belgravia Group, with its strong sales culture, to make the list.
Our Local Leaders list is often used by investment analysts to track the progress of public builders in penetrating and dominating the top markets in the country, since many public companies don’t regularly release their results by local market.
And in that regard, the list demonstrates the dominance of D.R. Horton, the biggest home builder in America last year. The company is the market leader in 10 of the top 50 markets, and in nine of the top 20. D.R. Horton is a firm believer in the benefits that accrue to the top dog—more clout with subs and suppliers, a first look at the best land deals, and strong sales and marketing efficiencies. However, Horton—which as of March 31, 2009, operated in 77 markets in 27 states—has also scaled back in or extricated itself from several metro markets during the downturn, including Denver and Southern California.
As public builders pull out of marginal markets and concentrate on core markets, their ability to finish first grows in importance. Public companies own the No.1 spot in 28 of the 50 markets. The builders with the next-closest number of first place finishes are Pulte and NVR with four, Lennar with three, and KB Home with two.
“‘Market share,” though, is a relative term when so little building is going on in major metros. Greater Phoenix, for example, saw its housing permits fall by 58% from 44,280 in 2006 to 18,533 in 2008, according to Census Bureau estimates, throwing many private builders out of business.
As a result, the market share of the top 10 builders in Phoenix rose from 58.9% to 74.2%. It remains highly concentrated and in the hands of public companies. Shea Homes is the only private company on the list of top 10 builders in Phoenix.
Some markets that had always been wide open have consolidated. In Atlanta, for instance, where the top 10 builders used to command only a 17% market share as recently as 2007, 31% of the activity is now in the hands of the top 10 companies. The leading builder in Atlanta, Legacy Communities, built 1,326 homes, which is a lot for the top builder in this city, a market where big builders have had trouble gaining traction and beefing up.
But other top 50 markets remain highly fragmented, often for a reason. A surprising number of markets still don’t have big builders in them, and it may be difficult for out-of-towners to buy land, establish operations, or gain any kind of scale due to convoluted zoning and permitting. Kansas City and New Orleans, places where the top 10 builders command only a 12% and 9.8% market share respectively, come immediately to mind. In New Orleans last year, three of the top 10 builders were Habitat for Humanity chapters.
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The list always reveals some amazing accomplishments. Consider that D.R. Horton, working under multiple brand names, managed to close a whopping 3,406 homes in Phoenix last year and take down nearly one in every five home sales. The division, if listed as a stand-alone company, would have been the 16th largest builder in America last year, ahead of Shea Homes and David Weekley Homes. Pulte’s Phoenix division, which includes Del Webb, came in a close second with 3,208 closings, an 18.3% market share.
Lennar’s Houston division (2,736) and NVR’s Washington, D.C., division (2,195) finished third and fourth on the list of the biggest local volume producers. Despite the massive volume of homes it sold, Lennar’s Houston division only commanded a 6.4% market share, since Houston accounted for more than 42,000 permits last year. By comparison, NVR’s Washington division, working under multiple brand names, earned 15.8% of all the sales there last year.
In Houston, one of the most closely watched markets, because it’s among the healthiest, the market share of the top 10 builders held steady, rising from 31% in 2007 to 32.3% last year. Toll Brothers recently made headlines by announcing that it has entered the Houston market. Nine of the top 10 builders in Houston managed to build 1,000 homes or more.
By comparison, no builder managed to close 1,000 homes in Dallas last year. Highland Homes gave market leader D.R. Horton a run for its money, closing 912 homes. Several other private builders—David Weekley, First Texas, and Grand Homes—made the top 10 list in Dallas, which has been buoyed in recent years by strong job gains.
Columbus, Ohio, the 39th largest market last year, has historically been one of the most concentrated markets. The top 10 builders there took down a 46% share, down somewhat from 52.5% last year. After the defection of Beazer and Centex, though, new players have entered the market who threaten to give the top dogs—M/I Homes, Dominion Homes, and Lifestyle Communities—a run for their money. Indeed, over the 18 months through June 2009, three out-of-town builders—Cincinnati-based Fischer Homes, New Jersey–based Hallmark Homes, and Indianapolis-based Westport Homes—either entered the market or significantly increased their presence in Columbus.
Other private companies held their leadership positions despite the home building recession. Ivory Homes maintained its leadership in the Salt Lake City market and actually increased its market share to 9.6%, even though its closings fell from 1,128 in 2007 to 669 last year. Ole South Properties remained the largest builder in Nashville, Tenn., the 20th largest home building market. McBride & Son, an ESOP company, is still No. 1 in St. Louis.