Public companies accounted for nearly 60 percent of the contracts for new homes in the Chicago market last year, up from 54 percent last year and well above the 11 percent market share they held in 1999, according to Tracy Cross & Associates, a Schaumburg-based consulting firm.
The top five builders in the Chicago area all were public companies, led by D.R. Horton of Fort Worth, Texas, with 517 local contracts signed last year.
The growth of public companies partly at the expense of private builders—a trend playing out in many markets across the country—will likely continue for the next few years until conventional banks grow more willing to finance land purchases and development, said Tony Avila, chief executive of Builder Advisor Group, a San Francisco firm that advises and raises capital for homebuilders.
Many private builders rely more on banks, which have clamped down on financing home construction since the financial crisis, while public companies have other options, such as issuing bonds or shares, Avila said.
Quite an increase since 1999. This reminds me of the shift from really small builders – often just a few homes a year – before World War II to the larger-scale construction afterward (often said to be illustrated by Levitt and Sons). Then (big housing need, new innovations) and now (economic crisis leading to new lending guidelines), broader economic and social conditions contributed to these changes.
With that said, how does this affect the average homebuyer and resident? Large-scale firms may offer economy of scale and therefore lower prices but they also might have fewer options in their housing designs and interiors and be able to construct larger developments, contributing to sprawl. Does the quality increase? Do homebuyers have a better experience in one versus the other?