By Boyce Thompson. Chances are when you buy your groceries, even if you buy them from Genuardi's in Philadelphia or Bruno's in Alabama, you buy them from one of 10 chains that control more than half the grocery action. Chances are when you buy a new car, even if it's a Mercedes Benz or a Saab, you buy it from one of the Big Three automakers. And increasingly, chances are when you turn on the radio you are listening to a station owned by one of 25 station groups who control half of radio station revenue. No wonder you can't find any decent music on the radio.
Consolidation pervades our life. We see it in the hotels where we stay, the restaurants where we eat, and the banks where we keep our money. Sometimes it seems like we have fewer choices. Other times it seems like we have access to better prices and more selection. It's hard to say.
The home building industry is nowhere near as consolidated as the grocery, radio, and automotive industries. Still, one third of the people who buy a new home this year will buy it from a company that appears on our list of the top 100 home building companies; one in five will buy from a public home building company.
Every year since the last recession the BUILDER 100's share of the market has increased. Ten years ago, the top 100 companies took down a measly 12.2 percent of the national share. Back then, only five companies did more than $1 billion in annual sales.
Today, 18 companies exceed that magic threshold, with several more well on the way. But the most amazing story of the last several years is how big the biggest companies have become. The four largest companies in the industry now do more than $7 billion in sales and close about 25,000 or more homes a year. This year, D.R. Horton tops our BUILDER 100, having exceeded 30,000 in U.S. closings last year, an industry record.
For buyers in the largest markets--Atlanta, Phoenix, and Washington--the effects of consolidation are even more pronounced. (See "The Dominators") Public builders in Phoenix control nearly half of new-home sales. In the largest new-home markets, it's getting hard to find private companies on the list of the top 10 builders.
The upshot for consumers
What does this mean for today's new-home buyer? The home building industry is still a long way off from the kind of consolidation that leads to fewer consumer choices and higher prices. If anything, the saturation of big builders, with their strong operating efficiency and lower capital costs, puts downward pressure on prices.
It would be hard to argue that home builder consolidation has reduced the consumer's choice of builders. At the last Census count, there were still more than 130,000 builders in this country with payrolls doing primarily new single-family construction. The barriers to enter this business remain low.
It's equally hard to argue that consolidation has led to a homogenization of housing design, either. Especially not when you consider that 10 and 15 years ago local and regional builders typically imitated each other's styles. Housing styles in production neighborhoods are more diverse today than they ever were.
The one potential negative might be in community design. The big builders prefer subdivision tracts, where new construction seems increasingly relegated. In many cities, there's a sameness to these developments, despite the addition in recent years of green spaces, trails, and community centers.
What's your opinion? Drop me an e-mail and let me know.
Editor in Chief