The 2016 top ten publicly-traded builders captured a 27.4% share of new single-family home closings, up from 25.6% in 2015. The 27.4% share in 2016 is out of the 559,000 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 top builder, D. R. Horton, jumped to a 7.2% share of new home sales in 2016, up from a 2015 share of 5.7%.
The companies’ fiscal years vary and do not perfectly align with calendar years, but the comparison was made against their prior year 10K filings for uniformity. Comparing the top ten builders from 2010 through 2016, the top ten shares based on annual SEC 10Ks were, in order, 26.9%, 24.3%, 23.9%, 25.3%, 26.4%, 25.6% and 27.4%.
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 and the knowledge of their local markets and their flexibility allows them to customize their product to meet local demands and preferences. Also, small 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, tallied 169,000 in 2016. In May, Hanley-Wood will report the BUILDER 100 rankings of builders for 2016 closings. At that time, we will examine the change over time in the top 100, top 50 and top 20 builder share.
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.