Concentration in the Homebuilding Industry: Trends, Strategies, and Prospects
Although still fragmented, the homebuilding industry has undergone changes in recent years that have increased the share of production by larger builders. The top 100 builders nationally now account for about half of all new single-family home sales, up from just over a third two decades ago. However, most of these gains reflect the growing market share of just two home construction companies – D.R. Horton and Lennar. These two home builders have achieved economies of scale by concentrating their building activity in the nation’s 50 largest metro markets, as well as by making strategic acquisitions. While homebuilding is unlikely to reach the same degree of concentration as many other major industries, large companies that successfully scale their operations in major metro areas will likely generate a disproportionate share of growth in the coming years.