The big bruisers of the building business have been flexing their muscles, according to new research from the National Association of Home Builders, which found that the country's 10 largest firms have almost doubled their market share over the last five years.

Expanding largely through mergers and acquisitions, the top 10 racked up 20 percent of all new home closings last year. In 1997, they had only an 11 percent market share. In numerical terms, the behemoths recorded 191,800 closings in 2002 vs. 86,990 five years earlier.

Though the market is still characterized by numerous small firms, the largest 60 builders were responsible for nearly 312,300 closings in 2002. In 1992, they closed only 111,900 deals. In total, the largest 60 builders have almost one-third of the entire new home market. The largest 100 own 35.4 percent of the business.

"Small builders still remain the dominant force in the housing industry," said NAHB Economist Elaine Frey. "The question is, for how long?"

The market share of individual builders also has grown substantially. But their portions are still small relative to the entire market.

In 1992, for example, Centex Homes, the nation's largest builder, was responsible for just 1.6 percent of all homes sold. Ten years later, D.R. Horton was ranked No. 1, capturing 3.2 percent of the new home market.

"While this is still not a large market share," Frey said, "if large firms continue to grow at the same rate, the market could become very different, with production and sales concentrated in the hands of a few enormous firms."

That is already occurring in some places, the study found. In Austin, for example, the five largest builders now own 79 percent of the market, up from 52 percent a decade ago. In Denver they have a 58 percent market share, up from 42 percent.

The increase is even more dramatic in Miami, where the big five now have a 46 percent market share. Ten years ago, they took down just 13 of all building permits. In nearby Ft. Lauderdale, their share jumped from 17 percent to 56 percent. And in Indianapolis, it went from 21 percent to 52 percent.

The giants haven't taken away business from their smaller competitors in every market, though. In a few spots, they've actually lost market share, albeit not much.

In Washington, D.C., for example, the largest five builders took out 27 percent of the permits issued last year. Ten years ago, they were responsible for 28.4 percent of all housing starts in the area. In San Diego, their share of permits dipped from 50 percent to 42 percent.

Nevertheless, in most places the pace of consolidation has picked up steam since the turn of the century, and most firms told the NAHB they will continue to follow that course.

The Arlington, Tex.-based Horton firm has snagged 17 other companies since 1994. But the third largest builder, the Lennar Corp. of Miami, has added 19 companies, including 11 since 2000. One of Lennar's additions was U.S. Home, a deal which alone enabled the parent company to boost its number of closings by 79 percent.

Bloomfield Hills, Mich.-based Pulte Homes, the second largest builder, hasn't been as active as either Horton or Lennar. But one of the seven companies it has acquired since 1996 was the Del Webb Corp., which was the nation's eighth largest builder in 2000.

According to the NAHB economist, both Pulte and Horton say they plan to notch revenues of $10 billion by 2004.

To reach that goal, she said, the two companies would have to boost their revenues by 33 percent and 39 percent, respectively, above current levels. And to do that, they would have to grow externally rather than internally.

Generally, large builders acquire other companies to enter new markets or diversify their product lines. But another major factor is their huge appetite for land and finished building sites. For that reason, the giants often target medium to large size local or regional builders which have extensive land holdings.

Published: October 8, 2003

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.