Two national homebuilders are set to grow with plans to combine this year, marking the latest major acquisition in the industry’s booming consolidation trend.
Irvine, California-based New Home Co. said Monday it would acquire Dallas-based Landsea Homes for $1.2 billion, creating what the companies said would be one of the top 25 largest U.S. builders.
Landsea sold 2,831 homes last year, while New Home Co. sold 1,123, according to self-reported statistics to housing data company Zonda. Both firms build attached and detached single-family homes.
The acquisition expands New Home Co.'s footprint into Florida and strengthens its presence in Landsea's other four states, Arizona, California, Colorado and Texas, in which New Home Co. already has a presence.
The deal has already been approved by Landsea’s board and is expected to close in the third quarter.
The industry has seen an uptick in mergers and acquisitions since 2022, noted Chris Jasinski, CEO of advisory firm JTW Advisors, who works on M&A deals. The reason is in part due to low interest rates and heightened demand for homes during the pandemic that helped prop up homebuilders’ finances.
“Builders were making tons of money coming through COVID, and so these big builders had the margin, they had higher margins than their medium-sized builder and smaller builder competitors,” Jasinski said in an interview. “They've been able to be more aggressive and still be profitable, which is one of the things that's really accelerated consolidation.”
M&A is a way for a homebuilder to strengthen its business by securing some of the most competitive and necessary assets: land and labor. Economy of scale is also a key factor in consolidation, allowing large companies to have high margins and lower costs while producing more.
Acquisitions most often happen for two reasons, according to Jasinski. They can be done as an add-on to an existing company — the New Home Co.-Landsea deal is an example — or for strategic reasons such as entering a market through expansion.
Acquiring Landsea gives New Home Co. a more affordable product that targets first-time buyers and first-move-up buyers. Landsea’s reported average sale price was $525,000 while New Home’s was $825,000, according to Zonda.
While it’s typical for a larger builder to purchase a smaller one, the reverse is playing out for New Home Co. and Landsea. New Home Co.’s asset manager owner, Apollo, is committing $650 million of new equity to the deal that would make publicly traded Landsea private.
Landsea’s stock rose 60% Tuesday after coming off a first-quarter earnings report where the builder posted a net loss of $7.2 million and slight year-over-year increases in new home orders and deliveries.
As of last week, seven M&A deals between homebuilders have closed this year, the most recent being Dream Finders Homes’ acquisition of Green River Builders. There were 12 deals in 2023, according to John Burns Real Estate Consulting, which exceeded the long-term average of eight per year. There were at least 11 deals in 2024, Homes.com research shows.
Jasinski predicted more M&A to come. “New homes have a distinct advantage over resales,” he said. “I think M&A activity is going to be robust. ... We're very active with multiple deals in various stages of the process. And my cohort, my friendly competitors, are reporting similar dynamics.”