In many respects, 2023 was the year of the homebuilder. The persistent scarcity of existing homes drove buyers toward newly built properties, allowing builders to maintain double-digit margins.
New construction accounted for approximately 30% of active for-sale housing inventory, doubling the usual figures for a standard year.
This surge in new construction activity sparked a wave of consolidation within the industry, with public and private homebuilders engaging in 12 merger and acquisition (M&A) deals throughout the year. This surpassed the historic average of eight, as outlined in a report by John Burns Research & Consulting.
Buoyed by robust performance, homebuilders are leveraging their strong financial positions to pursue various strategic initiatives, including stock buybacks, land acquisitions and active participation in the M&A arena, the report said. Since the beginning of this year, the industry has witnessed the completion of five transactions, with two others announced.
- Smith Douglas Homes went public in January.
- Century Communities expanded in Nashville by acquiring Landmark Homes.
- CastleRock Communities also expanded in Tennessee with its purchase of The Jones Company.
- United Homes Group acquired Creekside Custom Homes, growing its presence in Myrtle Beach, South Carolina.
- Dream Finders Homes acquired Crescent Homes, expanding in South Carolina and Tennessee.
Meanwhile, prominent Japanese builder Sekisui House announced plans to acquire M.D.C. Holdings and turn it into one of the largest builders in the U.S. The acquisition is set to close in the first half of 2024. And Landsea Homes is set to expand its presence in Texas through the acquisition of Antares Homes.
In the current environment, public builders enjoy a competitive edge over their private counterparts, John Burns reported. Their size and scale allow them to be more efficient in their spending. They also boast advantageous relationships with land sellers and can command lower costs of debt.
Conversely, private builders with substantial land holdings and established operations are attractive targets for larger builders that are seeking to expand their footprints amid limited land supply and heightened competition for finished lots.
