Foreign homebuilders are making big inroads into U.S. housing market

As federal and state authorities clamp down on foreign investments in American businesses and real estate that could pose a risk to national security, some foreign entities are making inroads into American homebuilding

The latest was the recent blockbuster transaction that saw Sekisui House, a Japanese company, acquire the country’s 12th largest homebuilder, MDC Holdings, for $4.9 billion. MDC shareholders will receive $63 per share in cash, a 19% premium above the stock’s closing price on the day before the sale was announced.

There is not even a hint that the deal with Sekisui House would jeopardize American interests, or even warrant an investigation into whether the acquisition is anti-competitive in the highly fragmented new home sector, where thousands of independent builders operate.

Indeed, the Osaka-based company is often heralded in the trade press as a top-notch outfit with a sterling reputation.

”The global company’s business value proposition weaves together its shareholder return stewardship with equally strong commitments to customer care ... and environmental, social and governance commitment and investment,” says John McManus of The Builder’s

Daily newsletter.

Thomas Carpitella of FTS Inc., a staffing agency specializing in hiring for the tech, homebuilding and accounting/finance sectors, pointed out that Sekisui House “obsesses over the things that matter most, people and the earth.”

“In an industry where 99% of the competition only obsesses over unit counts and profits, Sekisui House speaks a different language than their competitors,” Carpitella commented in McManus’ review of the sale.

In a deal the newsletter calls the “homebuilding story-of-thedecade (so far),” Sekisui, already the 13th largest builder in the country, will become larger than such housing household names as KB Home and Toll Brothers. Based on 2022 sales, only D.R. Horton, Lennar, Pulte and NVR are larger.

Sekisui already owns several other U.S. homebuilders, including Woodside Homes, Holt Homes, Chesmar Homes and Hubble Homes. Woodside builds in California, Arizona, Nevada and Utah; Holt, in Washington and Oregon; Chesmar, in Texas; and Hubble, in southern Idaho.

With the MDC acquisition, the Japanese firm will have a nearly nationwide footprint. Through its Richmond American Homes subsidiary, the Denver-based MDC is active in at least 13 states, including several mentioned above as well as Florida, Maryland and Virginia. MDC also operates subsidiaries in the mortgage, insurance and title businesses.

While the firm is growing, the other eight largest builders “are barely growing” in terms of land holdings, according to

John Burns Research and Consulting.

Sekisui isn’t the only Japanese company operating in the U.S. housing business.

Daiwa House, also of Osaka, owns three firms here, including Stanley Martin Homes in the East Coast states, CastleRock Communities in Texas and Trumark in several Western states. And CastleRock recently announced plans to acquire The Jones Co., a major Nashville builder.

According to McManus, “more than a dozen” domestic builders are now subsidiaries of Japanese worldwide corporate enterprises. Together, he reports, they account for “tens of thousands of U.S.-built houses.”

“I think (Japanese activity in the U.S. housing market) is going to accelerate,” Margaret Whelan of Whelan Advisory told BUILDER magazine. “Japanese companies have decided they are going to get ahead of what they believe will be a recovery in the U.S.”

Meanwhile, a U.S. appeals court has stopped Florida from enforcing a ban on Chinese citizens owning homes or land in the state, and Hawaii is considering legislation to bar foreigners from buying real estate there, in an effort to improve affordability for residents.

Missouri also has added to its restrictions on foreigners owning property. Missouri already caps foreign agricultural land purchases at 1% of the state’s total agricultural land.

Now, Gov. Mike Parson has issued an executive order banning businesses or individuals from nations designated as U.S. adversaries from purchasing farmland within a 10-mile radius of critical military installations (meaning, all staffed military bases) in the state. Nations currently classified as foreign adversaries include China, Cuba, Iran, North Korea, Russia and Venezuela.

At the federal level, the Government Accountability Office — the investigative arm of Congress — has told the Department of Agriculture to get its act together when collecting data about foreign ownership of the nation’s farmland. In a restricted report, the GAO said that the “USDA needs to collect, track and share the data better.”

According to the USDA, “foreign ownership and investment in U.S. agricultural land — which includes farmland, pastures and forest land — has grown almost 50% since 2017.”

Foreign-owned wind companies acquiring leases to build wind turbines on agricultural land is largely responsible for the 50% increase.

In its investigation, the GAO found that Uncle Sam is having a “hard time” tracking such transactions, largely because records are kept at county tax and recorder offices and are not maintained in a single database. Consequently, total foreign holdings are likely to be understated.

My oldest son recently sent me a photo of his twin daughters proudly posing with their new Georgia driver’s licenses, and for a while — a looooong while, to be honest — I was overwhelmed by a jumble of emotions. I was proud, of course, proud of the kind, conscientious young ladies they’ve become but also strangely sad that they looked so …well, so much like fashionable women in their wide-legged jeans and cropped tops.

“The little bald people are growing up,” I texted him, my fingers shaking with nostalgia. If I hadn’t been on deadline, I probably would have succumbed to a good ugly cry.

I can’t help but feel wistful for their long-ago debut, when these identical hairless babies anointed me as an abuela for the first time.

It was magical and scary, humbling and exciting, an experience that made sacrifices so worth it. Since then, I’ve been blessed with other grandkids, each a gift that has revived my delight in knock-knock jokes and my commitment to improving the world in my own small way.

You know that saying, “If I had known grandkids were so much fun, I would have had them first.”

True, but grandparenting does so much more than provide fun, hugs and cuddles. It gives context. It rewards with a new role and responsibilities. It helps link the generations. But it has also reminded me of the unrelenting march of time. Watching your children’s children go from learning to walk to learning to drive is like announcing the obvious: I’m getting old.

Old as in retirement age.

Old as in the creaking knees stage. Old as in I can’t hear the waitress in a noisy, crowded restaurant.

Old as in valuing health over wealth.

Old as in falling asleep before 10 o’clock.