5 Stocks to Sell as Homebuilder Slump Deepens

Industry Overview - The housing market is struggling as high mortgage rates deter potential buyers, leading sellers to refrain from lowering asking prices [1] - Additional challenges include aggressive immigration enforcement affecting the construction labor force and high tariffs on building materials like lumber, aluminum, and steel [1] Company Analysis: Lennar Corp. - Lennar reported a nearly 6% year-over-year revenue decline in Q4 2025, with shrinking margins [3][4] - Gross margins fell to 17% in Q4, with expectations of further declines to 15-16% in Q1 2026 [4] - The company projects full-year 2026 deliveries of approximately 85,000, significantly below market expectations [4] - LEN shares have dropped over 20% year-to-date, with bearish indicators suggesting further downside [5] Company Analysis: Meritage Homes Corp. - Meritage Homes, with a market cap of $4.6 billion, reported a Q3 2025 revenue of $1.4 billion, missing estimates by over 6% [6][7] - Margins fell from 21.4% to 20.1% in Q3, and the company's spec business model may lead to increased liabilities in a slowing market [7] - Despite a brief share price increase, MTH shares have since declined, indicating collapsing momentum [9] Company Analysis: D.R. Horton - D.R. Horton, with a market cap of $42.5 billion, reported a revenue decline of only 3% year-over-year, outperforming many competitors [11] - The entry-level housing market remains stagnant, with many potential buyers unable to make down payments or unwilling to move from low-rate mortgages [13] - The company's fiscal Q4 2025 margin dropped to 20%, and the stock has decreased by 15% since early December [13][14] Company Analysis: NVR Inc. - NVR operates an asset-light business model and has seen a revenue decline of 4.5% year-over-year in Q3 2025 [16][18] - Although NVR shares are down only 10% year-to-date, bearish momentum is building, with technical indicators suggesting a potential dip [18] Company Analysis: Tri Pointe Homes Inc. - Tri Pointe focuses on high-net-worth areas but faces challenges as high mortgage rates prevent homeowners from moving up [19][20] - Despite beating recent earnings projections, revenue is declining year-over-year, and management has lowered margin guidance [21]