Home building remains an industry of small firms. According to preliminary results from the NAHB 2013 census of members, the average single-family builder has 10 employees, builds 27 single-family homes in a year, and has an average annual volume of $4 million. A preliminary look at public companies’ annual reports also shows that the top 10 national firms’ share of sales was 25.3 percent in 2013, up 1.4 percentage points from 2012, but below their 28 percent peak in 2006.

Share calculations are based on the universe of new homes for sale, often referred to as speculatively built homes. New homes for sale account for three-quarters of single-family housing starts; the rest are built through a direct contract with the builder or by the homeowner acting as the general contractor. The custom market, where homes typically are built on the owners’ land, are not included in the base of homes sold so the share of large national companies is closer to 18 percent of all single-family homes built.

Smaller home builders building on spec have had more difficulty returning to the market as banks backed out of the business and credit dried up, particularly for acquisition and development loans. As a result, ready-to-build lots are in short supply and prices are rising faster than the final home selling price. The credit access trend is turning, but it’ll take time for the development pipeline to catch up with the expected pent-up demand release.

As the economy and home building cooled, community banks—the overwhelming source for most small home building firms—stopped lending to residential real estate. NAHB’s quarterly survey of builders showed declining access to credit began in late 2006 and peaked in 2009, when less than 1 in 5 builders was even shopping for acquisition or development loans and more than two-thirds of shoppers reported worsening availability. Construction loan access fared slightly better as the share of builders looking for construction loans dropped from more than 90 percent in 2005 to under half in 2009. More than 70 percent rated access as worse in 2008 and 2009.

These credit indicators have improved modestly. One-third of survey respondents are shopping for development loans, and more than 60 percent are after construction loans. The share of shoppers experiencing worsening access to construction loans is 5 percent; 40 percent or more reported better access in 2013—the best since the survey began in 2005.

Through the boom, private builders sought credit at financial institutions, primarily community banks. In 2005, 90 percent of the builders reported seeking credit from financial institutions. That share has fallen to 70 percent as nontraditional sources had to be developed when the banks stopped lending. The Federal Deposit Insurance Corp. reports bank holdings of commercial real estate loans, which is where loans to builders fall in bank balance sheets. Those holdings have bottomed and are starting to increase (they went up 7.4 percent in 2013).

Lending still has a long way to go. The dollar value of single-family construction is down 39 percent since 2007, while the lending by banks to builders is down 78 percent. The return to fuller participation by banks awaits confidence in the housing market and the economy, and added competition from nontraditional credit sources.

Meanwhile, builders have slowed project development as they wait for better financing conditions. In the most recent survey, 17 percent of builders put single-family construction on hold; 27 percent put acquisition and development on hold. Those numbers are down significantly from more than 60 percent in 2008 and 2009. Many builders have turned to construction-to-permanent loans as an alternative. Almost one-third of survey respondents are using this option, up from one-fifth in 2009.

Access to credit will be a significant factor in how small and large firms divide the market. Early signs show access is improving, but the path to a full return remains a long one.