Industry Concerns & Government Intervention - The administration is aggressively pursuing supply-side solutions to housing affordability, which is viewed negatively by home builders [2] - The administration believes there's a national housing deficit causing high home prices and inflation, and perceives builders as deliberately limiting production for profit [3][4] - The administration believes increasing home supply can improve affordability, reduce inflation, and boost employment [5] - The focus on supply-side solutions is problematic because there is currently a demand problem, not a supply problem [6] Company Performance & Valuation - Home builders have improved operations, become more asset-light, and gained competitive advantages [8] - Home builders outperform S&P peers on many metrics but trade at a fraction of their valuation, suggesting a potential revaluation [9] - The sector's multiple should increase based on prudent capital allocation after a difficult demand period [7] Downgrade & Risks - Evercore ISI downgraded six home builder stocks due to exogenous risks from the administration [1][11][12] - The downgrades were from "buy" or "outperform" to "neutral" or "inline," but price targets, though cut, remain above current trading levels [11][12] - The severity of the administration's changes could impact earnings and price targets [13] - The risks from the administration are not fully understood, and investors were not prepared for them [13][14]