MIAMI—Call it a mega merger. Two of the largest homebuilders, Miami-based Lennar Corp. and Arlington, Va.-based CalAtlantic Group struck a $9.3 billion deal to merge and create the nation's largest homebuilding company.
The merger comes at a time when America's homebuilding sector is faced with a number of challenges from labor shortages to higher regulatory expenses. At the same time, opportunity abounds in the industry.
Builder confidence in the market for newly-built single-family homes increased five points to a level of 74 in December on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) after a downwardly revised November reading. This was the highest report since July 1999, over 18 years ago.
GlobeSt.com sat down with Saul Ewing Arnstein & Lehr Attorney Charles Brecker to discuss the significance of the merger and what it will mean for the homebuilding industry and especially to Miami's Lennar Corp. Specifically, we asked: What does the Lennar/CalAtlantic proposed merger tell us about the homebuilding industry?
“Lennar's recent shopping spree, first purchasing WCI earlier this year to its latest acquisition of CalAtlantic Group, exemplifies the growing popularity of homebuilding companies merging this real estate cycle,” Brecker tells GlobeSt.com. “We've seen Pulte Group acquire Centex Homes and DiVosta Homes; the mergers of Standard Pacific Corp. & Ryland Homes, which formed CalAtlantic two years ago, as well as Taylor Woodrow & Morrison Homes.”
The result of this consolidation is evident. There are fewer major homebuilders in any given market in the nation, says Brecker, especially publicly traded ones, compared to 10 to 20 years ago.
“This trend is accelerating as a result of the building environments in many states,” says Brecker. “These environments entail oppressive permit-related fees and assessments, the lack of capital available for smaller homebuilders, and the challenge of building homes in many markets which suffer from shrinking pools of skilled laborers, especially in Florida and across the Southwest.”
How did Lennar's WCI grab impact South Florida's housing market? Here's one take.
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