Big home builders swallowing up their smaller competitors
The country’s largest publicly traded home builders are on a roll of sorts, using their generous access to capital to swallow up smaller, privately held home builders that have struggled to secure financing, the Wall Street Journal reported.
Big builders are enjoying healthy profits due to robust home prices, and have also been bolstered by the bond market, which issued a record $8.1 billion in bonds last year and is set to have one of its strongest years ever, according to a J.P. Morgan analysis seen by the Journal. Builder confidence in the market for newly built, single-family homes also rose six points to 57 on the National Association of Home Builders/Wells Fargo Housing Market Index for July.
The largest 10 publicly traded builders sold 30 percent of all new homes in the first quarter of 2013, as compared to only 24 percent in 2007, according to a Deutsche Bank analysis reviewed by the Journal. Sales of newly built homes were running at an annual pace of nearly 480,000 in May, according to the Commerce Department.
But their smaller counterparts have struggled to find money as lenders show their reticence to finance home builders in the wake of the financial crisis.
“It’s getting tougher and tougher for the little guy,” Michael Kahn, a Florida-based building-industry consultant, told the Journal. “The big builders are coming in with big purses and saying, ‘Sell me what you’ve got, I’ll write you a check for it.'”
In the past 18 months, public builders have completed at least eight major acquisitions for about $1.5 billion, Kahn added. [WSJ] – Hiten Samtani