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.