Pulte, one of the largest US homebuilders, said on Wednesday it would buy rival Centex for $1.3bn in stock in a deal that reflects the growing importance of size during the economic downturn.

Large US banks have been choking off credit to smaller builders as the housing slump continues and even leading builders have been labouring to generate enough cash each quarter to keep lenders on board.

'The banks are making choices today around who they want to continue to do business with in the industry,' Richard Dugas, Pulte’s chief executive, who will run the merged company, said. 'They’ve clearly gotten less interested in lending to small builders that are having difficulty.'

The Times, FT Online