Jul–Sep Preview: Downside Risks in US Homes; Support from Domestic Operation

This report previews Jul-Sep (2Q) results for the Japanese housing sector. Downside risk remains for US detached housing, where high inventory levels and sales incentives continue to squeeze margins, and we stay wary of a full recovery in 2027. Sumitomo Forestry and Sekisui House have already cut guidance for overseas operations, which appears priced in, but downside risk remains. Domestic contracting and leasing remain resilient: Daiwa House may raise its full-year OP guidance again, while Daito Trust's construction orders are still weak but stronger contracting margins and robust leasing and development operations could support a guidance upgrade. The built-for-sale market remains healthy, with strong detached-home sales at Iida Group and a possible dividend hike, while Open House's growth should moderate in F9/27 due to the absence of high-margin condo projects. Demand for pre-owned homes and building materials remains strong;