How a Japanese firm is transforming U.S. homebuilding

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Published Date 1/7/2025

There is a famous proverb that perfectly characterizes Japanese determination: “Fall down seven times, stand up eight.” It teaches resilience and persistence, conveying the message that no matter how many times you face setbacks, it's crucial to keep getting back up and trying again.

This is aptly applied to Japanese homebuilder Sekisui House, a firm that is quietly expanding operations in the U.S., bringing new investment and innovation to a home construction sector that is racing to keep pace with demand, according to Realtor.com’s Keith Griffith.

Last January, Sekisui House acquired major U.S. homebuilder MDC Holdings, which builds single-family homes under the name Richmond American Homes, in a $5 billion cash deal. It also now owns American subsidiaries Woodside Homes, Holt Homes, Chesmar Homes, and Hubble Homes. Together, the company estimates those subsidiaries will deliver 15,000 new homes annually across 16 states, making it the fifth-largest builder in the United States, says Griffith. “While Sekisui House’s construction stats remain far behind the biggest U.S. builders such as Lennar and D.R. Horton, the company’s quiet expansion has made it a significant player in the U.S. market,” he adds.

Back in its homeland, Sekisui House is a high-end builder focused on custom homes, and the country’s No. 2 builder by revenue. But with Japan’s housing market decelerating due to a rapidly aging and shrinking population, the company has turned to America to expand its opportunities for growth. CEO Yoshihiro Nakai said last year that the MDC acquisition “marks a significant advancement of our strategy to expand in the U.S. and bring the value of our philosophies and technology to U.S. homebuilding, adding that the builder believes it can become a one-of-a-kind entity in the U.S. by combining Japanese and U.S. technologies and, above all, sharing its passion for providing quality housing.

Sekisui House will send a team of 20 experts to the U.S. to begin training local contractors such as carpenters, marking the company’s largest overseas training program to date. It hopes the new training program will help it grapple with a labor shortage that has plagued the U.S. homebuilding industry, as evidenced by the National Association of Home Builders, which estimates a housing shortfall of some 1.5 million units.

Unlike in the U.S., where an array of trade specialists are used, Japanese homes are typically built with far fewer workers in part because Japanese construction workers are multidisciplinary and trained in a variety of key tasks. Griffiths cites a Financial Times analysis from 2017 that found that the average Japanese construction worker produces about 37% more new homes each year than the average U.S. construction worker.

“Homebuilders may compete for labor, so having multiskilled workers is one of the initiatives we want to consider most,” Nakai has said, according to Japanese news outlet Nikkei Asia. But the builder remains skeptical as to whether the Japanese approach to homebuilding will translate to the U.S., where builders are constrained by thickets of regulations, and union rules often strictly prescribe which tasks must be performed by members only.

This is not unlike the same fundamental challenges other U.S. builders are facing —namely high input costs (like land, labor, and lumber), regulatory hurdles, and weakened buyer demand in the current environment of high mortgage rates. But Sekisui may have some advantages as well, with its lower cost of capital model, permitting them to keep prices competitive. They also see it as an opportunity to flex its financial muscles as a large international company, offering preferred financing directly to homebuyers in the form of mortgage rate buy-downs or below-market rates.

As for the public reception of Sekisui House’s products, the company continues to operate its U.S. subsidiaries under their original brands, offering homes built in the same style and with the same methods as they have been in the past. As time goes on, however, it plans to add new offerings and test the U.S. appetite for homes constructed with Japanese technology and design influences. Its Shawood line of Japanese-style wood houses will account for 3,000 new homes by 2032 — a home line that adjusts the structure of the home to its local environment and climate by controlling sunlight and airflow to reduce heating and cooling costs. The homes also focus on the use of advanced insulation material and “airtight” construction methods to boost energy efficiency.

Griffiths adds, however, that the Shawood homes are built using framing techniques that require precision joining down to the millimeter. “That level of precision will require special training, and it remains to be seen whether U.S. construction workers will embrace the new training and techniques required for the Shawood line.”

For the first nine months of 2024, Sekisui House reported about $5 million in revenue from overseas sales — up 156% from a year earlier, and accounted for about 30% of the company’s total revenue, up from just a 15% share the previous year.

Increased investment in homebuilding in the United States is always welcome, as the housing supply gap is one of the most important domestic issues of our time, says Griffiths. Providing safe, affordable, sustainable places for American families to live, the industry here invites Sekisui House to show us all what it can do. It is, after all, the land of the rising sun.

Realtor, TBWS

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