Marketdash
Back to Stock Market News

Five Homebuilder Stocks to Avoid as the Housing Market Struggles

MarketDash Editorial Team
1 day ago
The housing market faces a perfect storm of high mortgage rates, labor shortages, and tariff pressures. From national giants like Lennar to regional players like Meritage Homes, homebuilders are seeing shrinking margins and declining sales that suggest 2026 could be another rough year.

The housing market isn't exactly sprinting into 2025's finish line—more like limping. High mortgage rates have created a standoff between potential buyers who can't afford today's prices and sellers who'd rather hold tight than lower their asking prices. It's a freeze that nobody particularly enjoys.

Making matters worse, several additional pressure points are squeezing the industry from multiple directions. Aggressive immigration enforcement has tightened the construction labor pool just when builders need workers most. Meanwhile, tariffs on essential materials—lumber, aluminum, steel—are driving up costs. The combination creates a particularly unpleasant environment for anyone trying to build and sell homes.

Both budget-focused builders and luxury homebuilders are feeling the squeeze. Unless mortgage rates take a meaningful dive, this might be one sector worth watching from the sidelines.

Here are five housing stocks facing serious headwinds as we head into 2026.

Lennar Corporation

Lennar Corp. (LEN) has been grabbing headlines lately, and unfortunately for shareholders, the news hasn't been good. The company dropped its Q4 2025 results on December 16, and anyone hoping for a turnaround story got a reality check instead. Revenue fell nearly 6% year-over-year, and margins continued their uncomfortable shrinking act.

The company's strategic pivot toward high-volume, low-margin homes was always going to create some pressure, but Q4 gross margins landing at 17% still stung. Even worse, management expects further compression to the 15-16% range in Q1. Sales growth remains sluggish despite mortgage rates backing off their peaks, and Lennar projects full-year 2026 deliveries around 85,000 homes—well short of what the market was expecting.

Poor results have become something of a pattern lately, which helps explain the 22% short interest. But these numbers were bad even by pessimist standards.

LEN shares have already dropped more than 20% year-to-date, and the chart suggests more pain could be coming. After clinging to the 200-day simple moving average for several months like a lifeline, the stock shattered through that support level following the disappointing earnings release. The price is now back at levels not seen since June, and a bearish MACD crossover points toward additional downside ahead.

Meritage Homes Corporation

Meritage Homes Corp. (MTH) operates as a $4.6 billion regional homebuilder with a footprint across 10 states, concentrated in the western and southern United States. The company focuses on starter-level and move-up homes, but runs on relatively thin margins and doesn't have the deep pockets that larger competitors like Lennar can tap into when times get tough.

That financial reality made Meritage's Q3 2025 earnings report particularly concerning. The company missed EPS estimates by nearly 20%, and quarterly revenue of $1.4 billion came in more than 6% below expectations. Margins also slipped again, falling to 20.1% from 21.4% in the previous Q3.

The company's spec business model—building homes before securing buyers—creates additional risk in a slowing market. When the backlog grows, it quickly becomes a liability rather than an asset, forcing the builder to offer more incentives and further squeeze margins just to move inventory.

MTH shares showed a brief moment of hope with a 12% jump over a few days at the end of November, even as a Death Cross formed between the 50-day and 200-day moving averages. That gain turned out to be a head fake, though. Shares quickly plummeted back below both moving averages during a brutal seven-out-of-eight-day losing streak. The MACD and RSI tell the same story of collapsing momentum, and regional homebuilders like Meritage simply face too many headwinds to make a compelling case heading into 2026.

D.R. Horton

Shifting back to the national builders, D.R. Horton (DHI) operates on a completely different scale than Meritage—we're talking ten times the size, with a $42.5 billion market cap and annual sales exceeding $32 billion. The company dominates the entry-level homebuilding market, specializing in townhomes, condos, and single-family detached homes. Those single-family detached properties account for roughly 87% of total revenue, and the company builds across 36 states.

Unlike many of its peers, D.R. Horton didn't completely stumble during its most recent earnings report. Revenue came in above expectations and declined only 3% year-over-year.

But here's the problem: the entry-level housing market remains frozen. Many of D.R. Horton's prospective buyers either lack the down payment to make a purchase, or they're locked into a low-rate mortgage from a few years ago and see no compelling reason to move. The company has been forced to offer incentives to generate sales, which pushed fiscal Q4 2025 margins down to 20%. The stock has dropped 15% since early December.

The price is once again approaching the 200-day moving average, and a bearish crossover looks imminent on the MACD indicator. D.R. Horton likely needs mortgage rates to drop closer to 5% before it can break free from its current downward trajectory.

NVR Inc.

NVR Inc. (NVR) represents another homebuilding heavyweight with a lagging stock price and mounting challenges. Like most names on this list, NVR generates the majority of its revenue from entry-level homes under the Ryan Homes and NVHomes brands. But the company's business model differs meaningfully from competitors like Lennar or D.R. Horton.

Third-party developers hold land for NVR, which allows the company to operate an asset-light model and command a higher valuation multiple than traditional builders. That works great when growth is humming along. When growth slows, however, those third-party developers will demand fatter margins to hold the land, which squeezes profitability.

The company has posted top- and bottom-line earnings beats in its last two quarters, which sounds encouraging. But revenue growth is indeed slowing—down 4.5% year-over-year in Q3 2025.

NVR shares are down only 10% year-to-date, which looks downright healthy compared to the 20% drawdowns some large-cap peers have suffered. However, the stock sits at a critical juncture, and bearish momentum is building.

A Death Cross formation suggests the stock's next move will likely be a drop below the 50-day moving average. The MACD and RSI indicators also show the trend attempting to reverse downward. With both technical and fundamental headwinds in place, NVR represents a risky hold right now.

Tri Pointe Homes Inc.

Tri Pointe Homes Inc. (TPH) takes a different approach as a small-cap company with a luxury-focused business model. The company targets high-net-worth areas in California, Washington, Arizona, and Colorado. In theory, higher-end consumers should be more insulated from high interest rates and inflation than lower and middle-income buyers, which would give Tri Pointe an advantage that other homebuilders can't match.

There's a catch, though. The company needs people to sell their current homes and move up into larger, more expensive properties. With mortgage rates still above 6%, even wealthy homeowners are choosing to stay put. That creates a particular problem for companies operating in volatile luxury markets like Tri Pointe.

Tri Pointe has beaten recent earnings projections, which is something. But revenue is steadily declining year-over-year, and management lowered Q4 margin guidance during the October 23 conference call for Q3 results. TPH shares are now trading back below both the 50-day and 200-day moving averages, with the MACD showing another momentum-killing bearish crossover.

The bottom line: unless mortgage rates fall significantly and soon, the housing sector looks like a place to avoid rather than hunt for bargains. These five stocks illustrate just how many challenges homebuilders face—from shrinking margins and declining sales to technical indicators pointing toward further weakness. Sometimes the best trade is the one you don't make.

Back to Stock Market News

Five Homebuilder Stocks to Avoid as the Housing Market Struggles

MarketDash Editorial Team
1 day ago
The housing market faces a perfect storm of high mortgage rates, labor shortages, and tariff pressures. From national giants like Lennar to regional players like Meritage Homes, homebuilders are seeing shrinking margins and declining sales that suggest 2026 could be another rough year.

The housing market isn't exactly sprinting into 2025's finish line—more like limping. High mortgage rates have created a standoff between potential buyers who can't afford today's prices and sellers who'd rather hold tight than lower their asking prices. It's a freeze that nobody particularly enjoys.

Making matters worse, several additional pressure points are squeezing the industry from multiple directions. Aggressive immigration enforcement has tightened the construction labor pool just when builders need workers most. Meanwhile, tariffs on essential materials—lumber, aluminum, steel—are driving up costs. The combination creates a particularly unpleasant environment for anyone trying to build and sell homes.

Both budget-focused builders and luxury homebuilders are feeling the squeeze. Unless mortgage rates take a meaningful dive, this might be one sector worth watching from the sidelines.

Here are five housing stocks facing serious headwinds as we head into 2026.

Lennar Corporation

Lennar Corp. (LEN) has been grabbing headlines lately, and unfortunately for shareholders, the news hasn't been good. The company dropped its Q4 2025 results on December 16, and anyone hoping for a turnaround story got a reality check instead. Revenue fell nearly 6% year-over-year, and margins continued their uncomfortable shrinking act.

The company's strategic pivot toward high-volume, low-margin homes was always going to create some pressure, but Q4 gross margins landing at 17% still stung. Even worse, management expects further compression to the 15-16% range in Q1. Sales growth remains sluggish despite mortgage rates backing off their peaks, and Lennar projects full-year 2026 deliveries around 85,000 homes—well short of what the market was expecting.

Poor results have become something of a pattern lately, which helps explain the 22% short interest. But these numbers were bad even by pessimist standards.

LEN shares have already dropped more than 20% year-to-date, and the chart suggests more pain could be coming. After clinging to the 200-day simple moving average for several months like a lifeline, the stock shattered through that support level following the disappointing earnings release. The price is now back at levels not seen since June, and a bearish MACD crossover points toward additional downside ahead.

Meritage Homes Corporation

Meritage Homes Corp. (MTH) operates as a $4.6 billion regional homebuilder with a footprint across 10 states, concentrated in the western and southern United States. The company focuses on starter-level and move-up homes, but runs on relatively thin margins and doesn't have the deep pockets that larger competitors like Lennar can tap into when times get tough.

That financial reality made Meritage's Q3 2025 earnings report particularly concerning. The company missed EPS estimates by nearly 20%, and quarterly revenue of $1.4 billion came in more than 6% below expectations. Margins also slipped again, falling to 20.1% from 21.4% in the previous Q3.

The company's spec business model—building homes before securing buyers—creates additional risk in a slowing market. When the backlog grows, it quickly becomes a liability rather than an asset, forcing the builder to offer more incentives and further squeeze margins just to move inventory.

MTH shares showed a brief moment of hope with a 12% jump over a few days at the end of November, even as a Death Cross formed between the 50-day and 200-day moving averages. That gain turned out to be a head fake, though. Shares quickly plummeted back below both moving averages during a brutal seven-out-of-eight-day losing streak. The MACD and RSI tell the same story of collapsing momentum, and regional homebuilders like Meritage simply face too many headwinds to make a compelling case heading into 2026.

D.R. Horton

Shifting back to the national builders, D.R. Horton (DHI) operates on a completely different scale than Meritage—we're talking ten times the size, with a $42.5 billion market cap and annual sales exceeding $32 billion. The company dominates the entry-level homebuilding market, specializing in townhomes, condos, and single-family detached homes. Those single-family detached properties account for roughly 87% of total revenue, and the company builds across 36 states.

Unlike many of its peers, D.R. Horton didn't completely stumble during its most recent earnings report. Revenue came in above expectations and declined only 3% year-over-year.

But here's the problem: the entry-level housing market remains frozen. Many of D.R. Horton's prospective buyers either lack the down payment to make a purchase, or they're locked into a low-rate mortgage from a few years ago and see no compelling reason to move. The company has been forced to offer incentives to generate sales, which pushed fiscal Q4 2025 margins down to 20%. The stock has dropped 15% since early December.

The price is once again approaching the 200-day moving average, and a bearish crossover looks imminent on the MACD indicator. D.R. Horton likely needs mortgage rates to drop closer to 5% before it can break free from its current downward trajectory.

NVR Inc.

NVR Inc. (NVR) represents another homebuilding heavyweight with a lagging stock price and mounting challenges. Like most names on this list, NVR generates the majority of its revenue from entry-level homes under the Ryan Homes and NVHomes brands. But the company's business model differs meaningfully from competitors like Lennar or D.R. Horton.

Third-party developers hold land for NVR, which allows the company to operate an asset-light model and command a higher valuation multiple than traditional builders. That works great when growth is humming along. When growth slows, however, those third-party developers will demand fatter margins to hold the land, which squeezes profitability.

The company has posted top- and bottom-line earnings beats in its last two quarters, which sounds encouraging. But revenue growth is indeed slowing—down 4.5% year-over-year in Q3 2025.

NVR shares are down only 10% year-to-date, which looks downright healthy compared to the 20% drawdowns some large-cap peers have suffered. However, the stock sits at a critical juncture, and bearish momentum is building.

A Death Cross formation suggests the stock's next move will likely be a drop below the 50-day moving average. The MACD and RSI indicators also show the trend attempting to reverse downward. With both technical and fundamental headwinds in place, NVR represents a risky hold right now.

Tri Pointe Homes Inc.

Tri Pointe Homes Inc. (TPH) takes a different approach as a small-cap company with a luxury-focused business model. The company targets high-net-worth areas in California, Washington, Arizona, and Colorado. In theory, higher-end consumers should be more insulated from high interest rates and inflation than lower and middle-income buyers, which would give Tri Pointe an advantage that other homebuilders can't match.

There's a catch, though. The company needs people to sell their current homes and move up into larger, more expensive properties. With mortgage rates still above 6%, even wealthy homeowners are choosing to stay put. That creates a particular problem for companies operating in volatile luxury markets like Tri Pointe.

Tri Pointe has beaten recent earnings projections, which is something. But revenue is steadily declining year-over-year, and management lowered Q4 margin guidance during the October 23 conference call for Q3 results. TPH shares are now trading back below both the 50-day and 200-day moving averages, with the MACD showing another momentum-killing bearish crossover.

The bottom line: unless mortgage rates fall significantly and soon, the housing sector looks like a place to avoid rather than hunt for bargains. These five stocks illustrate just how many challenges homebuilders face—from shrinking margins and declining sales to technical indicators pointing toward further weakness. Sometimes the best trade is the one you don't make.

    Five Homebuilder Stocks to Avoid as the Housing Market Struggles - MarketDash News