As Pulte and Centex executives sell their pending merger to shareholders and others, they have noted that the combined entity will have a top 3 spot in 25 of the 50 largest housing markets in the country.
But that only hints at the factors—and potential influence of a combined Pulte/Centex in metros around the country—involved in this inherently local aspect of this national housing story, where the deck of players in numerous markets is about to be reshuffled, thanks to this pending merger.
"Centex's footprint was always a mile wide and two inches deep. They were in a lot of markets. ... It was common to see them in the top 10 in a lot of markets, but not in the top five. Pulte is dominant in some of the largest markets,” notes Hector Calderon, vice president at JMP Securities in San Francisco.
According to an analysis of BUILDER’s annual Local Leaders report, the new Pulte will exert a major influence in a number of additional housing markets across the board, from perennial powerhouses such as Atlanta and Phoenix to mid-packers such as Charlotte and Raleigh, N.C., which experienced neither the major boom nor the major bust of recent years.
In the major market department, Pulte will become the largest builder in Atlanta, the country’s second-largest housing market by building permits in 2008, with a 3.7% market share after incorporating Centex. In Phoenix, the country’s fourth-largest housing market, a bigger and better Pulte will control 14.8% of the new-home market, just one percentage point shy of major public builder competitor D.R. Horton. Other big Sun Belt markets would also go to Pulte, which would capture 7.4% of the Dallas-Fort Worth Metroplex, barely edging out Horton and its 7.3% share. Las Vegas would also go to Pulte, which would own Sin City and its suburbs with a 12.3% share.
Other serious market-share growth for Pulte will occur in:
• Chicago, where the combined firm will control 7%--nearly double its next closest competitor, D.R. Horton—of the Windy City’s housing market.
• Charlotte, N.C., where Pulte’s share will grow to 9.9%, making it the largest builder in this relatively healthy market. After the closure of C.P. Morgan (7.6% market share, according to last year’s Local Leaders) earlier this year, Pulte also has one fewer competitor for the top spot.
• Raleigh, N.C., where, as in Chicago, Pulte will account for 9.9% of the market, where it will build nearly twice the homes the next largest builder (KB Home) does.
• Riverside-San Bernardino, Calif., where Pulte will control 13.1% of this major California housing metro.
• Sacramento, Calif., where Pulte will control 14.6% of this critical Northern California housing market.
• San Antonio, where Pulte will vault past KB Home to grab 15.8% of the market and the number-two slot after D.R. Horton.
• Minneapolis/St. Paul, where Pulte will edge out Lennar for the top slot among Twin Cities builders with an 11.1% share.
• Indianapolis, where Pulte will hold 13.1% of the market, making it the biggest builder in this affordable market formerly controlled by C.P. Morgan, which shut down in February.
But stats, as always, only tell part of the story.
Many former Top 10 builders in these major markets have filed for Chapter 11 bankruptcy or even liquidated, leaving them weak, if not nonexistent, competition for Pulte. For example, two of the top 10 builders in Las Vegas according to last year’s Local Leaders were Kimball Hill Homes, which announced in December it would stop operating, and the Woodside Group, which earlier this year proposed turning itself over to its creditors.
And some of these markets are seriously hurting. Las Vegas, Phoenix, and Riverside-San Bernardino have been experiencing record levels of foreclosures, which have dramatically impacted new-home demand and pricing. When these markets rebound, Pulte may be well-positioned for their recovery, but until then, these market-share gains also represent greater exposure to the housing downturn.
Alison Rice is senior editor, online, at BUILDER magazine.