Homebuilder Stocks Under Pressure After Evercore ISI Downgrade
D.R. Horton, KB Home, and Toll Brothers cut to 'In Line' on concerns of persistent sluggish housing demand despite improved affordability.
Shares of major U.S. homebuilders faced downward pressure after Evercore ISI downgraded a trio of the sector's biggest names, citing concerns over a persistent lack of buyer demand. In a note to clients, the influential research firm cut its ratings for D.R. Horton (DHI), KB Home (KBH), and Toll Brothers (TOL) from "Outperform" to "In Line."
The downgrade reflects a growing sentiment that the housing sector's recent rally may have outpaced fundamental realities. Evercore's analysis suggests that even with modest improvements in mortgage affordability, a significant increase in homebuyer activity has failed to materialize. The firm pinpointed the core issue as in the housing market.
Evercore ISI analyst Stephen Kim noted that a catalyst for the stocks to re-rate higher would be evidence of margins bottoming out, a development he does not anticipate in the near term. Underscoring the cautious outlook, the firm also trimmed its price targets for the builders. , while . The ratings shift signals deepening concerns about the ability of home construction companies to navigate a volatile market defined by cautious consumers and ongoing affordability challenges.