Lennar Corporation recently announced the acquisition of CalAtlantic Group. Together, the companies form the largest home builder in the U.S.
The merger was driven by a desire to combat increasing challenges facing the construction industry. The lack of skilled labor, suitable land, and increased regulations has been a continuing hurdle for new home builders. The result has been near historic lows in inventory of new homes for sale.
Lennar will face an economic environment that is still experiencing a lag of growth compared to historic averages in the industry but believes they will be able to effectively increase cash flow and reduce debt through operational synergies.
The announced merger could signal increased consolidation in the new home market to offset increasing costs and housing market downturns. Economists are hopeful this will lead to an increase in production of new homes.