Lennar Makes Deal for CalAtlantic as Home Builders Face Challenges

The Lennar Corporation said on Monday that it would merge with the CalAtlantic Group to form America's largest home builder in a stock-and-cash deal worth $5.7 billion. The deal would create a behemoth with around 240,000 building plots in 21 states, a market value of about $18 billion and combined revenue of $17 billion over the past 12 months.

Lennar and CalAtlantic anticipate reaping $250 million in annual cost savings and paying down debt obligations. But the deal will not alter a basic problem: The construction of new homes in the United States lags below historical averages.

A decade after the big housing bust dealt a blow to many smaller home builders, the industry's largest firms continue to grapple with higher regulatory expenses that make building homes -- especially starter homes -- too costly, some housing-finance experts said. The situation confounds some people, given the pressing need for affordable housing for young families.