As a result of historically low borrowing costs and relaxed regulations on smaller companies going public (thanks to the JOBS Act), publicly traded home builders have been gaining market share. Halfway through 2014, public builders have 35.5% market share, up 6.1% from 2013. This gain was made through:
- IPOs. Eight builders have gone public over the past year and a half, accounting for 2.9% of the increase.
- Mergers and acquisitions. Publicly traded builders have purchased 14 sizeable private builders over the past two years, which has helped to boost the 16 original builders’ market share by 3.2% (from 2013).
With lots in good locations difficult to find and land prices reaching elevated levels in numerous markets across the country, public builders have been taking advantage of their lower cost of capital to buy private builders with lots in the right locations. Given higher lot prices and loftier valuations for home building operations, and much more expensive capital, private builders are more willing to sell and monetize their business.
Whether growth comes organically, through purchasing private builders, or private companies listing on a national exchange, publicly traded home builders have become a much bigger part of the new home market.
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