Barclays is moving to the sidelines on homebuilder stocks heading into next year, growing cautious due to the potential of interested remaining higher than investors expect. The firm downgraded D.R. Horton , Lennar Corporation , PulteGroup and KB Home to equal weight from overweight. "As homebuilding's utopia looks increasingly out of reach, we no longer expect builders to defy gravity," analyst Matthew Bouley wrote in a Wednesday note.
On top of that, the incoming Trump administration could impose tariffs on a bevy of imported materials used by homebuilders, which could also make it harder for the central bank to lower rates. "Indeed, the journey to the 'utopia' of lower interest rates with a still-healthy macro is fraught with obstacles in 2025, and we think a reset to earnings estimates and valuations is necessary to become more positive on the builder group again," Bouley noted.