Mergers--They All Seem To Be Doing It

Today, we are getting news of the latest merger announcement in a long string of announcements in recent years of big home builders who are merging, consolidating or going out of business. CalAtlantic is announcing a merger with Lennar Homes. This will not only be the new largest merger among USA home builders but will be the second merger for CalAtlantic in as many years (Standard Pacific recently merged with Ryland Homes). How does this affect you? Why should you care? And how is it that in an industry that is growing so fast, those companies are having to merge with competitors in order to make money?

Well, the simple answer is, they can't keep up with the pace of business growth and the cost of the labor shortages, land costs, and building material costs. And how does this affect you, as an Investor and Home Buyer?

• Builders are stretched and can't watch everything going on
• Builders are letting things fall through the cracks
• Builders are not following up on questionable warranty issues
• In general--Buyers are struggling to hold builder's feet to the fire

During the past few years, as a new home construction specialist, I can tell you that I have seen things that will make your hair curl. Mistakes. Problems. Mold. Unwanted features added. Appliances breaking within months of installation. AC systems designed such that they can not cool the house. Roofs installed in a way that they will begin to leak in a few short years. Granite that had cracks in it. Yards that drain into other yards. Doors put in the wrong place. Plumbing in the wrong places. Missing anchor bolts along the outside walls. Missing insulation. Hollow tile and wood floor installations. And the problems that I was seeing with just a couple of builders, has spread to a whole host of builders now. I don't know of any builders today that I can honestly say is 100% on top of their game. That is to say--Builders have allowed themselves to get too busy and their crew leaders in the communities to get so busy that they don't have time to fully do their jobs. And I am not talking about one builder. Sadly, I can not exclude any builder that I know today from this conversation.

So, Buyer Beware! Does this mean you should not be buying new construction or a home that was built during the past 5 years? No, but it does mean, if you don't have a Realtor who knows how to build a home from the foundation to the roof, and you choose to buy a home without a Realtor under the assumption that the builder will give you a better deal, let me tell you that first of all, that simply is not true. I don't know of any buyers who have gotten a better deal out of a new home builder who did not use me as their Realtor. Secondly, if you have built less than 5 homes in your life and did not walk those homes with specialist every week while they were being built so that you could learn construction the way I know construction and you think you are going to get a high-quality home and be able to help the builder keep things straight during the building process--you should probably consider if I said the same thing to you about your job. Do you think I could hold my own with your boss or your team after sitting in on a few of your meetings or reading a few weeks on the internet about your business? I doubt seriously your job and your business is that easy. Well, if you think home construction is easy, you have probably never really built a home before.

Mergers. Consolidation. Material shortages. Labor shortages. Increases in land costs. Times are changing in Central Texas real estate and our national real estate markets.  Buyers and Investors--be aware of what is happening in this market and how these things affect you.

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