Oct. 7 at 6:01 PM
Home builder stocks fell sharply Tuesday after Evercore analyst Stephen Kim downgraded six major companies from Outperform to In-Line, citing weak consumer sentiment rather than high mortgage rates as the key drag on demand.
Kim, previously one of Wall Street’s most bullish voices on the sector, said the housing shortage can’t help builders if new supply risks pushing prices lower. He now expects margins to bottom only by spring 2026, delaying any valuation recovery.
Shares of D.R. Horton and PulteGroup dropped 5.2% and 4.2%, respectively, while the iShares U.S. Home Construction ETF slid 2.1%, heading for its lowest level since mid-August. Nearly 40% of builders cut prices in September, and 65% offered incentives as inventories rose and demand stayed muted.
Kim argues that stocks won’t re-rate higher until investors see stable, sustainable margins, something he doesn’t expect for several quarters.
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