When the smoke cleared after the Great Recession, the home builders who survived were in a surprisingly strong position. They had fewer competitors and more power in their local markets. They have since built on that advantage, consolidating until many markets are controlled by just a few builders. Their power has exacerbated the affordable-housing crisis in the U.S. that’s keeping people from buying their first home, some economists say.
As The Washington Post reports, the economists find this dwindling competition has cost the country approximately 150,000 additional homes a year—all else being equal, according to a recent working paper by economists Luis Quintero and Jacob Cosman of Carey Business School at Johns Hopkins.
On a national scale, mergers among building behemoths, such as Lennar’s 2017 union with CalAtlantic, have increased the market share of the top 20 builders from 21% in 2008 to 29% in 2018, according to the National Association of Home Builders.
With fewer competitors, builders are under less pressure to beat out rival projects, and can time their efforts so that they produce fewer homes while charging higher prices.
From 2013 to 2017 home prices grew more than twice as fast as they would have if the market hadn’t consolidated, Quintero and Cosman say. Read the full story.