Property Play: Japanese homebuilders go on a U.S. shopping spree

A version of this article first appeared in the CNBC Property Play newsletter with Diana Olick. Property Play covers new and evolving opportunities for the real estate investor, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. Sign up to receive future editions, straight to your inbox. Japanese companies bought two U.S. homebuilders last month alone, extending a string of purchases that has given the group an increasing market share over the last decade. Sumitomo Forestry acquired Tri Pointe Homes, which was a publicly traded builder, for $4.5 billion . Tri Pointe operates in 12 western, southwestern and southeastern U.S. states as well as Washington, D.C. Sumitomo now counts five, formerly U.S. homebuilders in its group and aims to supply 23,000 homes annually in the U.S. by 2030, according to a news release. “Initially [Japanese firms] were buying smaller private companies, maybe in one or two cities, and now this is a third public home builder acquisition that they’ve made, so they’re writing much bigger checks,” said Margaret Whelan, founder of Whelan Advisory and one of the biggest investment bankers in the builder space. Stanley Martin Homes, which was itself acquired by Japan-based Daiwa House in 2017, announced an agreement in February to purchase United Homes Group, which operates mostly in the Carolinas, for $221 million. Japanese builder Sekisui House, which operates in the U.S. as SH Residential Holdings, made a huge purchase in 2024, acquiring M.D.C Holdings for $4.9 billion. With the four other U.S. builders it acquired, Sekisui is now the sixth largest builder in the U.S. by volume. “Despite short-term headwinds for U.S. housing, Japanese buyers are reallocating capital out of a shrinking, aging domestic housing market and into the long-term growth story for U.S. housing,” said Danielle Nguyen, vice president of research at John Burns Research and Consulting. “These firms are well-capitalized, bring patient, low-cost capital and are building U.S. platforms. They’re not short-term financial sponsors, they’re investing across land, development, and housing with a long runway.” All told, Japanese companies now own 33 homebuilders that operate in the U.S. Once the most recent deals are closed, they will have close to 6% of U.S. market share. As they build more homes, it could actually benefit consumers, because firms out of Japan are much more efficient in their production. “They tend to build every house twice — the first time in 3D online — [then] reverse engineer it, reduce the waste and the cost to build and the time to build,” said Whelan. “And so bringing those best practices to the U.S. is going to make a big difference to affordability, basically, to their bottom line and what they can pass along to the consumer. So it’s a win-win for U.S. consumers.” Whelan also pointed out that, compared with the 10-year average, the publicly traded builders are trading at around 1-times book value right now, a favorable valuation for a buyer to come in at. Daiwa House and Sekisui, which are both traded on the Nikkei, have been most prolific in the U.S. and are seeing their stocks outperform because their earnings are growing faster versus their peers that are not in the U.S. In addition, the cost of capital for Japanese groups is so much lower. According to Whelan, they typically look to generate about a 5% return on equity. That compares to the publicly traded U.S. builder stocks that need a 10% return on equity. “And that’s why you’re seeing so many new Japanese entrants into the U.S. housing market,” she added.