The 2014 top ten publicly-traded builders captured a 26.4% share of new single-family home closings, up from 25.3% in 2013. The 26.4% share in 2014 is out of the 439,000 new home sales reported by the Census Bureau. However, this count represents a smaller share of the total single-family market when not-for-sale, custom home building is included.
The 2014 composition of the top ten builders remained unchanged from 2013, but the concentration at the top increased, along with changes in rankings. The top two builders, DR Horton and Lennar, increased their share among the top ten builders to 11.3% combined in 2014, up from 9.9% in 2013. The third ranked builder, Pulte, dropped its share to 3.9% in 2014 from 4.1% in 2013. Ryland jumped up one slot in ranking, while Taylor Morrison fell two slots. Collectively, the top ten builders closed on 116,009 new homes according to their respective SEC 10K filings for 2014.
The companies’ fiscal years vary, but the comparison was made against their prior year 10K filings for uniformity. Comparing the top ten builders from 2010 through 2014, the top ten shares based on annual SEC 10Ks were, in order, 26.9%, 24.3%, 23.9%, 25.3 and 26.4%. The 26.4% share in 2014 is out of the 439,000 new home sales reported by the Census Bureau for 2014.
Publicly-traded companies possess many advantages including better access to credit from their own balance sheets, economies of scale in land and material purchases as well as in advertising and land holdings. However, small builders are better positioned to address the growth in the custom home building market. Small builders possess an intimate knowledge of their local markets and their flexibility allows them to customize their product to meet local demands and preferences. Also, smaller home building companies usually have their roots in the local market and can use those more personal relationships to improve quality and increase repeat business.
The number of starts of homes built on an owner’s land, with either the owner or a builder acting as the general contractor, increased 20% in 2014 to 162,000. In May 2015, Hanley-Wood will report the BUILDER 100 rankings of builders for 2014 closings and more geographic detail will also be available.
In the meantime, the often held small builder concern that the large national companies will take share away has not occurred. The residential construction industry remains primarily a sector dominated by a large number of small entrepreneurs.