Where do private homebuilders thrive?

Posted on August 27, 2012 ยท Posted in Geographic Strategy

Builder magazine has recently posted the top ten builders in the top fifty new single family detached markets in the United States.  Among the top twenty (>3,586 closings in 2011) there was only one market led by a private builder (Related in Miami).  Among the bottom thirty there were 15 markets led by a private builder.

Along similar lines among the top twenty the average market share of the lead builder was 12.65% where as among the bottom thirty the average share of the lead builder was 19.86%.

What migh this mean for private builder strategy?

First it suggests that public builders are not as focused on the smaller markets.  Most public builders have certain divisional overhead prejudices which require minimum market sizes for their interest.  This is an aid to the private builder focused on the smaller markets in that there will not be as many public builders with which to fight.

Public builders of course typically have a capital advantage while most private builders have capital challenges.  Best to not compete on capital.

On the other hand private builders typically have a knowledge advantage in their home markets as well as a stronger connectivity to their land markets.

We would also note that there were only three private builders with more than one top ten position among these top fifty markets.  Two of them appeared in three markets and one in two.  In each case their positions were focused on single states including Texas, Florida and Geogia.  Home market knowledge doesn't transfer very easily — but apparently most easily in the same state.

E-mail us for a table reviewing our analysis of buider positions in the top fifty markets.