A rising wave of mergers and acquisitions in U.S. homebuilding, driven by robust demand for housing and entry of Japanese buyers seeking further to expand their position in America’s markets. This year is recording the highest M&A activity levels in the homebuilding industry-to-date, with 19 deals completed to date, already surpassing the annual average for the past five years of 12 deals. Additional deals are expected before the end of the year, continuing this trend. This wave of M&A activity is taking place amid a continued shortage of housing inventory, where mortgage rates have added their share of pressure.

These dynamics are sometimes described as the mortgage rate lock-in effect and have fueled demand for new homes, particularly from larger homebuilders that are capitalizing on this shift in market dynamics. As a result, market shares for major public builders increased from 30% five years ago to 50% today.

This wave of acquisition has produced the sheer dominance of Japanese companies. Whelan notes that half of her transactions this year have involved Japanese investors, who are drawn to the U.S. housing market due to its higher growth potential compared to Japan’s stagnant domestic market. Lower capital costs make Japanese firms less expensive, so they submit more aggressive bids. Some of the key acquisitions include Sekisui House’s acquisition of MDC Holdings, which helped move Sekisui into the top five large U.S. homebuilders.

Japanese investors are also bringing unique efficiencies to the construction process. According to Whelan, these firms can use advanced technologies such as 3D imaging and factory-based pre-fabrication to reduce waste in building and streamline the production process, resulting in cheaper and more affordable U.S. homebuilding. The housing market continues to evolve, and with this, industry experts foresee M&A activity being strong up until 2025 with further opportunities for Japanese buyers to expand their footprint in the U.S. homebuilding sector.