By Shaina Mishkin
Berkshire Hathaway on Sunday said it would acquire the midsize builder Taylor Morrison Home. The multiyear housing market slowdown has spurred a wave of mergers and acquisitions in the sector. More could be on the way.
"There's going to be consolidation in the group," says UBS analyst John Lovallo, who covers the home builders.
Recent trends suggest takeovers of the largest home builders, such as D.R. Horton and PulteGroup, are unlikely. In addition to Taylor Morrison, public home builders targeted for acquisition in recent years, such as Tri Pointe Homes and M.D.C. Holdings, have largely been medium-size builders.
"It is possible that M&A activity in the mid-cap space will pick up," KBW analyst Jade Rahmani wrote in a Monday note. "This transaction creates pressure for small- to midsize home builders to pursue value-creating transactions."
Typically investors sizing up builders compare price to book value, which measures what a company would be worth if liquidated. A common rule of thumb says to buy builders at one-times book value and sell at two-times.
That seems to hold for M&A as well. "What we've seen are companies that have significant discounts to book have been looked at," UBS's Lovallo says. Berkshire target Taylor Morrison, for example, is trading at 0.9-times book value, according to FactSet.
To identify potential companies of interest, Barron's screened builders included in the iShares U.S. Home Construction exchange-traded fund. We focused on midsize builders, with market capitalizations between $1 billion and $5 billion.
We then looked at book value, removing those trading above book. That eliminated Green Brick Partners and M/I Homes. We also removed Dream Finders Homes, which made an offer to buy the small builder Beazer Homes earlier this year. The resulting four public home builders span the spectrum from prebuilt to custom, with offerings for a range of buyers.
Meritage
The largest of the companies on the list is Meritage Homes, a roughly $4.4-billion builder based in Arizona that specializes in energy-efficient homes built under a "spec," or speculative, strategy -- in which construction begins before a sale takes place.
Like many builders, the company offers buyers incentives to keep homes selling at a tough time for housing, weighing on its profit margin.
"In volatile times, we believe keeping a strong balance sheet and a critical focus on capital allocation will place us on a solid footing when the market stabilizes," CEO Phillippe Lord said on an April conference call.
The company bought back $130 million of common stock in its first quarter and increased its dividend to $0.48 a share, he noted. "We will continue to seek balance between growth and shareholder returns given the current market backdrop."
Meritage trades just below book value at 0.9-times, according to FactSet. Eight of the 13 analysts covering the company rate it Hold, with an average price target of $77.78. Shares were up 4.3% to $68.03 in afternoon trading on Monday.
Meritage didn't immediately respond to a request for comment.
The $3.1 billion KB Home constructs houses for first-time and move-up buyers in California, Idaho, Washington, Colorado, Texas, Arizona, Nevada, Florida, and North Carolina.
The builder, which will soon relocate its headquarters from Los Angeles to Tempe, Ariz., operates under a built-to-order model -- meaning it doesn't begin a home until a buyer is identified.
Like other builders, its margin has been hurt by higher buyer incentives. It also reduced its full-year delivery guidance with its March earnings release.
The company is focusing on managing direct costs and shortening the time it takes to build, CEO Robert McGibney said on a call with investors. "We are confident the multiple advantages of our [built-to-order] model will ultimately result in a stronger company."
KB's stock price has suffered, falling 13.4% this year. The builder is trading at 0.8-times book value, FactSet data show. Analysts on average rate it a Hold, with a $54.77 target price. The stock was up almost 4% to $50.78 in afternoon trading.
KB Home declined to comment, citing the company's quiet period.
Based in Colorado, the $1.5 billion Century Communities builds in 16 states with an emphasis on affordable homes, "a segment which offers one of the largest pools of potential buyers and is supported by constructive demographic trends," the company said in an investor presentation.
Higher mortgage rates driven by the war in Iran hasn't helped its shares, which are down 11% this year. "Geopolitical issues and increased economic uncertainties, coupled with higher interest rates and gas prices, further eroded consumer sentiment, which weighed on our order activity most meaningfully in March," Dale Francescon, the company's executive chairman, said on an April conference call.
Despite this, the company "continues to be encouraged by bipartisan efforts to address the shortage of affordable housing and are still well positioned for growth when demand improves," Francescon added, noting that the company will grow its deliveries by 10% or more once the macroeconomic conditions that influence homebuying improve.
"So long as slower market conditions persist, we will continue to balance pace and price, control our costs and inventory levels, and return capital to our shareholders through dividends and opportunistically repurchasing shares at what we view as very attractive levels," he said.
Century Communities stock is trading at 0.6-times book value, according to FactSet. Two of the four analysts covering the stock rate it Buy, with an average price target of $70.
Century Communities declined to comment.
The smallest of the bunch, LGI Homes, has a $1.1 billion market capitalization and is trading at 0.5 times book value. The company's shares are bouncing back this year after falling over 50% in 2025, according to FactSet data.
Like Meritage, LGI is a spec builder. During a difficult time for home-building margins, it has maintained relatively high adjusted gross margins -- a result for which it credits its land strategy.
It accesses land through "a strong low-cost land pipeline, which is nearly 100% on-balance sheet, providing investors full transparency into our capital structure, driving margin durability by capturing the developer's economic value and minimizing reliance on external partners whose priorities may not align with the long-term value creation," CEO Eric Lipar said on an April call.
Four analysts cover the stock, with two rating it a Buy, according to FactSet. The average target price is $66.33. Shares were up 0.4% to $53.05 in afternoon trading.
LGI didn't immediately respond to a request for comment.
Write to Shaina Mishkin at shaina.mishkin@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 01, 2026 13:18 ET (17:18 GMT)
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