EVERY YEAR AT THIS TIME WE LIST THE 100 LARGEST builders in America. It's an impressive list, redolent with accomplishment. A quick glance shows that four builders now produce roughly 30,000 or more units annually, a level thought unsustainable even 10 years ago. A record 21 companies broke the $1 billion mark in revenue.

Each year our BUILDER 100 list begets the question: Is bigger really better? The answer is yes, if growth is how performance is measured. BUILDER 100 companies grew much faster in 2003 than the industry as a whole. While home building activity rose 8 percent as measured by total starts, BUILDER 100 companies delivered 14 percent more homes than the year before.

Moreover, 12 new companies leaped onto the BUILDER 100 list this year, evidence that they must be doing something very right. Each company produced more than 700 units annually. This is further testimony to the tremendous potential for hard-driving, smart home building companies.

Deliveries rose 44 percent at Legend Home Corp., which closed 845 homes in Houston alone. Cambridge Homes in Altamonte Springs, Fla., jumped onto the list with 782 units, a 22 percent increase in starts. A 30 percent increase in closings catapulted Dan Ryan Builders, based in Frederick, Md., into the 91st position on the list, with 758 homes delivered last year.

In The News Equally as impressive this year, though, is home building's performance compared with other industries. For comparisons of that kind, we need to look at other publications.

Seven home builders, all doing $3.4 billion or more in sales, now show up on Fortune magazine's list of the 500 biggest corporations in America. Eight more made Fortune's list of the top 1,000 companies. As a group, the Fortune 500 builders grew their revenues 19.7 percent last year, nearly three times the median for all 500 companies on the list. Even more significant, builders produced more growth in profit over the last five years than any of the 72 industry sectors mentioned in the Fortune report.

Forbes magazine recently listed the 400 best big companies based on their return on capital over the last five years. Four builders—NVR, Hovnanian, Meritage, and the Ryland Group—finished in the top 10, and 15 were in the top 100. NVR topped the entire list, with a 66 percent return.

The Wall Street Journal in March ranked industry groups by five-year average compound annual returns. Home construction finished second, with a five-year return of 28.8 percent, behind only the casino industry. Home construction took first-place honors over a three-year period.

Still Spread Out Despite rampant growth among the top 100 home building companies, they still account for only a little more than one out of three new-home sales. That percentage has doubled in the last 10 years, but the industry remains far less concentrated than other industries its size, thanks to its easy entry and abundance of opportunity.

At $9 billion in annual revenue, the biggest builders are now larger than household names such as Kellogg, Continental Airlines, and Lucent Technologies. Even so, they don't compare to a Georgia-Pacific ($20 billion), a DuPont ($27 billion), or a Time Warner ($43 billion).

A merger between two top 10 companies, coupled with some strong internal growth, could take care of that.

e-mail: bthompson@hanleywood.com

Editorial Director