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NEW YORK (AP) — Lennar is buying CalAtlantic Group in a $5.7 billion deal that will create the nation’s largest homebuilder as sales of new homes reach levels not seen in a decade.

The acquisition, which is worth more than $9 billion if $3.6 billion in debt is included, creates a company with a footprint in 21 states. The companies had $17 billion in revenue over the last 12 months.

Homebuilders face rising costs for materials, land, and in the wake of a pair of devastating hurricanes, rising labor costs.

The deal announced Monday is expected to generate annual cost savings of $250 million, with about $75 million in savings expected in fiscal 2018.

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“This combination increases our scale in the markets that we already know and in the products we already offer to entry level, move up and active adult customers,” said Lennar CEO Stuart Miller in a company release. “As a result, the combined company will have a top 3 ranking in 24 of the top 30 markets in the country.”

D.R. Horton Inc. of Texas is currently the nation’s largest homebuilder by revenue.

Lennar Corp. is based in Miami and CalAtlantic Group Inc. is based in Arlington, Virginia.

The most recent data from the Commerce Department last week showed that new home sales leapt 18.9 percent in September to a seasonally adjusted annual rate of 667,000, the highest level since October 2007.

The gains came from every region including the South, with a nearly 26 percent boost, where people are replacing homes destroyed or damaged in Hurricanes Harvey and Irma.

Economists believe housing demand will only increase with unemployment rates extraordinarily low.

Surveys of homebuilders reflect growing optimism about demand given the current housing shortage.

The stock deal will give CalAtlantic shareholders 0.885 shares of Lennar stock, with an implied value of $51.34 per share, a 27 percent premium to CalAtlantic’s closing price on Friday.

Current CalAtlantic shareholders will own about 26 percent of the combined company.

Shares of CalAtlantic soared 19 percent before the opening bell Monday. Shares of Lennar fell about 4 percent.