What are the 10 best home builders in California? Generally speaking, the housing market is a very important metric that determines the health of the economy. The better the state of the economy is, the more people there are with good jobs that can afford to buy a house. Moreover, alongside clothing and food, housing represents one of the basic needs of any human, so home-building companies satisfy a very important need and their revenue is generated by households’ largest investments.
The U.S housing market seems to be in pretty good shape, despite a small slowdown in the number of housing starts in March. According to the Commerce Department, the number of new housing starts in March declined by 6.8% to a seasonally adjusted annual rate of 1.22 million units. However, the number of building permits increased by 3.6% on the back of a 13.8% surge in multi-family houses. Mortgage rates have started to increase with the Fed having raised the key interest rate, but the unemployment rate is holding steady under 5% and wage growth offsets the effect of the higher costs of buying a house for households.
When it comes to California, the housing market is poised to grow. The state has a higher job growth rate than the average across the country, with non-farm jobs growth expected at around 1.9% this year, compared to 1.3% across the U.S. Unemployment is also near multi-year lows, with 2017 projections at around 5.4%. California’s housing market also has a supply issue, with the unsold inventory index (the time required to sell the remaining inventory) having amounted to 3.4 months in August 2016, according to the California Association of Realtors.
The number of houses sold and the median price of houses in California has also been going up. In 2017, 419,600 units are projected to be sold at a median price of $525,000, up from 416,300 units and $502,000, respectively, a year earlier. The sales volume and prices are expected to grow, as they are still below pre-recession levels.
With this in mind, let’s take a closer look at the 10 best home builders in California to identify companies that will benefit the most in case of market growth in the state. To compile the list, we looked at the largest home builders in the U.S according to Builder Online, (see the 10 best rated biggest home builders in USA) then used data from their latest 10-K reports to identify how many houses they sold in California or the regions that included California.
Some companies, like Beazer Homes USA, Inc. (NYSE:BZH), PulteGroup, Inc. (NYSE:PHM), and D.R. Horton, Inc. (NYSE:DHI) don’t present the number of houses they sold in California separately, but include the data in their reporting segment (usually West) alongside other states. On the other hand, companies like M.D.C. Holdings, Inc. (NYSE:MDC), KB Home (NYSE:KBH), and CalAtlantic Group Inc (NYSE:CAA) present their figures for the California market separately. Therefore, we assume that the latter companies have a larger business presence in California than the former, even though the former have higher numbers of houses sold overall, though across the entire segment. Now, let’s see our list of best home builders in California.
10. Beazer Homes USA, Inc. (NYSE:BZH)
Beazer Homes USA, Inc. (NYSE:BZH) includes California in its “West” segment, which also includes Arizona, Nevada and Texas. The company closed 2,508 houses in the region in fiscal 2016 at an average closing price of $326,100 per unit. Beazer Homes USA, Inc. (NYSE:BZH) also had 261 lots with houses under construction in California at the end of its fiscal year ended September 30, and overall, controls 4,600 lots in the state, which makes it the second-largest in the West segment, behind Texas.
9. M.D.C. Holdings, Inc. (NYSE:MDC)
The next on our list of best home builders in California is M.D.C. Holdings, Inc. (NYSE:MDC) that generates one of the largest shares of its revenue in California (22%), with only Colorado amassing a larger share (30%). The company delivered 807 homes in the state in 2016, and generated revenue of $495.93 million from selling them at an average price of $614,500 per unit. Heading into 2017, M.D.C. Holdings, Inc. (NYSE:MDC) also had net new orders for 946 houses in the state.
8. Taylor Morrison Home Corp (NYSE:TMHC)
Taylor Morrison Home Corp (NYSE:TMHC), the number 8 on our list of best home builders in California has operations in Southern California, the Bay Area, and Sacramento, which together with Chicago, Denver, and Phoenix, represent its West segment. The company sold 2,628 houses in the region during the last year and had 1,131 houses in its backlog at the end of the year.
7. PulteGroup, Inc. (NYSE:PHM)
PulteGroup, Inc. (NYSE:PHM) includes California in its West reporting segment. The whole segment, which aside from California also includes Arizona, Nevada, New Mexico, and Washington, registered 4,047 closings in its fiscal 2016 ended December 31. This is the largest number of closings, although PulteGroup, Inc. (NYSE:PHM) provides separate data for Florida and Texas, where it had 3,441 and 3,726 closings, respectively.
6. Toll Brothers Inc (NYSE:TOL)
In Toll Brothers Inc (NYSE:TOL)’s 10-K report, California is the only state for which data is presented separately, as compared to other states which are grouped by regions. The company sold 1,006 houses in the state during its fiscal 2016 (ended October 2016) and generated revenue of $1.45 billion, based on its impressive average price per unit of $1.44 million. Toll Brothers Inc (NYSE:TOL)’s number of sold houses increased by 50% over the year.
5. Meritage Homes Corp (NYSE:MTH)
We are continuing our list of best home builders in California with Meritage Homes Corp (NYSE:MTH) that closed 1,020 houses in California. The state is part of the company’s West Region, which also includes Arizona and Colorado, and which included a total of 2,776 closings. The average price of its houses sold in California amounted to $578,800 and it has 231 houses in backlog. Meritage Homes Corp (NYSE:MTH) controls a total of 2,850 home sites in the state.
4. Lennar Corporation (NYSE:LEN)
California is part of Lennar Corporation (NYSE:LEN)’s West reporting segment, which also includes Nevada. The segment registered 5,734 deliveries in its fiscal 2016, ended November 30. This represented an increase from 5,245 houses delivered in its fiscal 2015. Lennar Corporation (NYSE:LEN) pointed out that it saw an increase in the number of home deliveries in California, which was partially offset by a decline in the number of houses delivered in Nevada.
3. D.R. Horton, Inc. (NYSE:DHI)
Similar to other companies, D.R. Horton, Inc. (NYSE:DHI) includes California in its West segment alongside Hawaii, Nevada, Oregon, Utah, and Washington. The segment registered 6,294 net homes sold in its fiscal 2016 (ended September 30), and based on this metric, West is the third-largest segment, behind Southeast (13,616 houses sold) and Southwest (12,433 houses sold). California home sales increased by 5% in in fiscal 2016, with D.R. Horton, Inc. (NYSE:DHI) saying that the increase was mainly due to growth registered in most of its California markets.
2. KB Home (NYSE:KBH)
KB Home (NYSE:KBH), the second on our list of best home builders in California is headquartered in California and the state represents its West Coast homebuilding segment. The state amasses one of the largest shares of KB Home’s business, with the company having delivered 2,825 homes there in its fiscal 2016 ended November 30. That represented 29% of the total number of homes delivered, trailing only the Central segment, which includes Colorado and Texas, and which had 38% of the total homes delivered. The houses sold in California had an average price of $579,900, which is the highest across all regions where KB Home (NYSE:KBH) operates.
1. CalAtlantic Group Inc (NYSE:CAA)
In California, CalAtlantic Group Inc (NYSE:CAA) delivered 23% of its total number of houses in 2016. More specifically, the company delivered 3,275 new houses in the state at an average selling price of $649,000. In addition, CalAtlantic Group Inc (NYSE:CAA) registered an increase of 28% in the number of houses delivered in California, the highest growth across all regions.
These are the 10 best home builders in California, based on the number of houses they sell in the state. As California is getting over one of the worst droughts in its history, the prices for utilities like electricity and water are still up and the government may set up more regulations that might affect the housing market. However, so far, companies don’t seem to be overly concerned that there will be any changes affecting their business severely in the near-term.