DOES IT SOMETIMES FEEL LIKE YOU ARE RUNNING out of elbow room in your market? Like every time you pursue a piece of land, someone else got there first? Like when you open a community, someone across the street begins at the same time and sells for less? Like your best people keep getting cherry-picked by public firms looking to buy expertise?
That's the way it's shaping up for more and more builders these days as the biggest housing markets in the country rapidly consolidate. Consider that the top 10 builders in Orange County, Calif., now control virtually all the sales and permits. Or that in San Diego, where a home is more expensive than one in Honolulu, the top 10 have a 78 percent share.
While California can make the dubious claim that it has the most consolidated markets, not even Midwestern markets are immune. In Cincinnati, for instance, the top 10 take down a 71 percent share. In Indianapolis, where C.P. Morgan closed 2,585 homes last year, the top 10 control 71 percent of the action. (To view the complete list of Local Leaders, see “Outer Limits,” page 126.)
ROOM TO BREATHE Our annual Local Leaders rankings have taken on so much importance these days that we decided this year to expand them to 75 and move the story to our June issue, where we could devote more space to it. Compiling and analyzing the list is a joint project between BUILDER and Hanley Wood Market Intelligence, formerly the Meyers Group, which tracks sales and permits in these top markets.
We discussed this challenge with three large private builders at the BUILDER 100 conference last month in Pebble Beach, Calif. The panelists agreed that as public builders pervade their markets, locals must take extraordinary land development steps to continue to grow. “We recently bought a piece [of land] that may take us 15 years to entitle,” said Sid Dunmore, CEO of Dunmore Homes in Sacramento, Calif., which has been overrun by public companies.
Reed Porter, president of Trend Homes, which this year was pushed off the top 10 list in Phoenix, added that as a matter of strategy he has been looking for close-in properties with environmental challenges. “We solve the problems with density solutions,” he said. Terry Russell, CEO of John Wieland Homes and Neighborhoods in Atlanta, concurred: “A lot of what we're doing is assembling multiple parcels. It takes a lot of work.”
LAND OF OPPORTUNITY? One reason we decided to include markets 51 through 75 is that the national builders increasingly look to them for expansion. But it turns out there isn't much easy share to gain in many of these places. The top 10 builders build 43 percent of the homes in Fresno, Calif., No. 51 on our list. In sunny Fort Lauderdale, Fla., ranked 72nd, the top 10 build nearly half the homes.
Some markets, the data reveal, are nearly overrun with public builders, who of course need to feed expectations for 15 percent to 20 percent annual growth. Consider that only two private builders appear on the top 10 list in Las Vegas and Washington. Shea Homes, the largest private builder in the country, is the only private builder on the list in Phoenix.
At the other extreme, none of the top 10 national builders builds in four of our new markets—Louisville, Ky.; New Orleans; Omaha, Neb.; and Mobile, Ala.—and only one national shows up on St. Louis' top 10 list, where all it takes is 85 homes to make the top 10. Of course, you may need a close relative in the land development business to enter that market.