Housing Market Boom Fuels Record M&A Activity
The US housing market is experiencing unprecedented demand, putting large homebuilders in the driver’s seat and making smaller builders attractive targets for acquisition. Both domestic and Japanese companies are driving this surge in M&A activity, which is expected to continue into next year.
A Record Year for Homebuilder Deals
According to Margaret Whelan, founder of Whelan Advisory, M&A activity in the single-family homebuilder space is having a record year in terms of dollar volume, with close to a record number of deals. There have been 19 homebuilder deals so far this year, with Whelan alone having four more set to close by year-end.
Why Big Builders Want to Get Bigger
“The big guys want to get bigger,” Whelan explained. “They want to get into more markets, more price points, more types of product, and as they’re doing that, they’re finding the most efficient way is through acquisitions.” Large homebuilders have clear advantages over smaller private builders, including lower costs of debt and access to cheaper capital.
Japanese Buyers Join the Fray
Half of the deals Whelan has done this year are with Japanese buyers, who are attracted to the US market due to its higher growth potential compared to their home market. Japanese companies like Sekisui House, which purchased MDC Holdings, are also bringing their expertise in value engineering to the homebuilding process, reducing waste and increasing efficiency.
The Future of Homebuilder M&A
Whelan expects the trend to continue, with more deals in the pipeline. The new administration could also provide a boost, with promises to open up more federal land for homebuilding and loosen zoning regulations. However, the impact of mass deportations on the builder workforce remains a concern. With land and labor costs being the highest expenses for homebuilders, any disruption to the workforce could have significant implications.
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