Homebuilder Stocks in Focus: What Trump’s Housing Push Means for Investors

The President of the United States is weighing in on the homebuilding industry.

From a Truth Social Post on October 5:

Source: Truth Social/@realDonaldTrump

In 2024, then-candidate Trump promised to lower housing costs by slashing regulation to incentivize new homebuilding. And he was responding to a real problem – homeownership is simply unaffordable for most Americans. Have a look at the next chart and you’ll see for yourself.

Source: Atlanta Fed

What you’re looking at is the Home Ownership Affordability Monitor (HOAM), a measurement put out monthly by the Atlanta Fed that compares median American incomes to the costs associated with homeownership. If those costs rise above 30% of the annual median income, homes are considered unaffordable by this index.

What should jump out is that, at 47% of median income, homeownership is the least affordable it has been in 20 years.

Can Trump really use the bully pulpit to spur new housing development? And what does it mean for the large, publicly traded homebuilders?

Let’s dive in…

Are Homebuilders Really Stalling – or Are High Rates to Blame?

In Q1 2025, unsold home inventory spiked to 507,000 – the most since October 2007. As of July 2025, there were 121,000 completed single-family homes sitting unsold in the U.S. – a 20% increase from 2024 and the most since 2009. By August, there was an inventory of 490,000 new homes for sale.

That means inventory is available, and new homes are waiting to be purchased. Yet they sit, unoccupied. According to some housing analysts, the president should set his sights on lenders. Interest rates are simply too high for potential buyers right now, leaving thousands of homes unsold. See for yourself.

The average 30-year fixed mortgage in the U.S. sits at 6.32%. And while that’s come down from recent highs, it’s still hovering near 20-year highs.

Here’s how HousingWire Lead Analyst Logan Mohtashami put it:

The builders’ completed units for sale is simply too high for them to start issuing new permits. The best thing Trump and [Federal Housing Finance Agency Director Bill] Pulte could do is get lower rates – the rest will take care of itself.

This poses a question: How is there a national housing crisis if constructed homes remain unsold?

This is where things get tricky.

Depending on who’s doing the research, there is a national housing shortage of between 3.7 million units (Freddie Mac Q3 2024 estimate) and 7.3 million units (National Low-Income Housing Coalition 2024 estimate).

Within that range, Zillow speculates the country is 4.7 million units short in its July 2025 analysis, while the National Association of Realtors (“NAR”) estimates a 5.5-million-unit shortage.

So, if there are over 100,000 finished homes waiting to be sold, how and why is the country millions of homes short by all estimates?

• Long-term underbuilding: The U.S. has not built enough homes to keep up with population growth or the high demand from millennials entering their prime homebuying years.

• Undesirable locations: Some unsold homes are in areas with little demand or declining populations, making them difficult to sell.

• Investor activity: Investors purchase a significant portion of available homes, especially from builders, removing them from the market for individual buyers and creating a shortage. These purchases reached record highs earlier in 2025… data shows that investors bought approximately 30% of single-family homes (both new and existing) on the market.

• Investor demand: Once investors buy these homes, often directly from builders, they rent them out rather than making them available for the public to buy.

• Increased costs: The rising cost of construction materials, labor, and financing results in elevated home prices, many of which buyers find unaffordable.

The bottom line is, yes, there is some unsold inventory. But America still needs more affordable homes. A flood of new supply from homebuilders would theoretically help lower prices, all else equal. The question is whether these companies can do that profitably and what the federal government can do to help.

How Trump Could Use Policy to Jumpstart Homebuilding

By urging major housing financiers Fannie Mae and Freddie Mac to pressure big homebuilders, President Trump aims to kick the housing market into gear. How can these government-sponsored enterprises ("GSEs") exert pressure?

The Federal Housing Finance Agency (“FHFA”), an independent government agency that supervises GSEs like Fannie Mae and Freddie Mac to ensure a fair U.S. housing finance system, will likely turn to their Affordable Housing Goals to jumpstart building.

The FHFA creates goals for Fannie Mae and Freddie Mac to provide affordable housing by purchasing mortgages for minority and low-income borrowers, and by renting to low-income families. The goals – updated every three years by the FHFA – help ensure the GSEs focus on underserved markets.

When a GSE meets its Affordable Housing Goals, it can access better financing terms… this provides more incentive for the lender to finance even more affordable housing. Pushing Fannie Mae and Freddie Mac to pressure homebuilders may involve FHFA policy changes, which can come in many forms:

• Adjusted housing goals: By encouraging affordable housing and adjusting housing goal benchmarks, the FHFA can push GSEs to purchase more loans for affordable properties and new construction.

• Streamlined financing: Adoption of different credit score models (like VantageScore) expands credit access to a wider group of potential buyers. Additionally, the FHFA can streamline the application process for developers to receive Federal Home Loan Bank (the other GSE under FHFA) funds for affordable housing projects.

• Expanded multifamily housing support: In late 2024, the FHFA increased the multifamily loan purchase cap for each GSE… a total of $146 billion for 2025. Doing so can free up critical funds for multifamily construction projects.

• More access for manufactured housing: The FHFA can support the financing of manufactured homes, an important source of affordable housing. This includes the purchase of “construction-to-permanent” loans that cover the cost of new manufactured homes, land, and installation.

However, many housing industry experts don’t see the lack of newly built homes as a supply problem… rather, it’s a zoning and permit issue. And there isn’t much GSEs can do about that.

According to the National Association of Home Builders (“NAHB”), government regulations at all levels accounted for almost 24% of the final price of a new single-family home and 40% of the cost of a multifamily home in 2021.

A 2022 survey also revealed that 83% of developers facing project delays cited permitting issues as the reason.

In most cases, however, zoning laws and building codes exist for good reason – to manage traffic, protect the environment, and prevent overcrowding. But some laws and regulations are so outdated that reform is likely the only way to resolve the crisis and accelerate development.

As the debate between homebuilders and policymakers rages on, one thing is clear… housing prices are sky high, and the pressure is on to increase the nation’s housing supply.

What does that mean for the largest, publicly traded homebuilders?

Homebuilding titans PulteGroup (PHM), Lennar (LEN), and D.R. Horton (DHI) account for approximately 30% of all new homes sold in the U.S. Let’s look closely at each.

PulteGroup: A Diverse Homebuilder With Strong Fundamentals

This major American homebuilder operates through brands such as Pulte Homes, Centex, Del Webb, and DiVosta Homes – each catering to different buyer groups across a variety of housing types and price ranges. Its Del Webb brand is a leader in the active adult (55 and over) market.

As of Q2 2025, PulteGroup had control of approximately 250,000 land lots. While not necessarily aimed specifically at PulteGroup, one might assume that Trump’s “land hoarding” comment was meant to capture the builder’s attention.

Looking at the company’s financials, PulteGroup reported Q2 2025 home sale revenues of $4.3 billion… a 4% year-over-year (“YoY”) drop. The decline was driven by a 6% decrease in closings to 7,639 homes but partially offset by a 2% increase in average sales price (up to $559,000).

Despite the dip in revenue, PulteGroup is still financially strong, with $1.3 billion in cash and a low 11.4% debt-to-capital ratio at the end of Q2 2025. This allowed PulteGroup to return significant cash to shareholders, including a Q2 share repurchase of $300 million.

A look at our proprietary Stansberry Score reflects PHM stock’s strong position with a solid B…

Lennar’s Q3 2025 Results Reflect Pricing Pressures Amid Housing Slowdown

Lennar, a major homebuilder since 1954, is known for its “Everything's Included^®” model, which offers premium features and smart home technology at no extra cost. Lennar builds various types of homes – including single-family, multi-generational, and active adult – across 21 states. Lennar also offers homebuyers in-house financing, ensuring a more streamlined buying process.

As a mass-market home producer, Lennar can quickly contribute much-needed supply to the country’s housing crisis. By lowering its prices and increasing incentives for homebuyers, the company is already doing what it can to help buyers afford new homes.

But the housing market is soft, and it’s reflected in Lennar’s most recent earnings report.

Here’s how Lennar’s Q3 2025 performed vs. Q3 2024…

• Revenues dropped 9% to $8.2 billion, the result of a 9% dip in average home sales prices (from $422,000 to $383,000).

• Net earnings decreased to $591 million from $1.2 billion.

• New home orders increased 12% to 23,044 homes.

• But home deliveries were flat at 21,584 homes.

• Gross margin was squeezed to 17.5% (down 5%) because of higher land costs and incentives.

On a positive note, Lennar reached a record-low cycle time of 126 days, proving that the company has the capability to build homes efficiently.

Though Lennar underperformed analyst expectations revenue-wise, there’s still a lot to like about the company… even in a soft housing market.

Our Stansberry Score for Lennar is a solid B, as the company continues to show strong home order growth. That should bode well for Lennar given Trump’s demands for more housing. Additionally, its debt-to-total-capital ratio of 13.5% is low, contributing to the company’s strong balance sheet.

D.R. Horton Leads the Pack With Strong Fundamentals Despite Softening Demand

Everything is bigger in Texas… that includes D.R. Horton, America’s largest homebuilder by volume since 2002. Headquartered in Arlington, D.R. Horton builds in 125 markets across 36 states, giving the company an impressive national footprint. It maintains a strong presence in the Sun Belt, though the region’s weakening market has led to the builder pulling back… especially in Texas and Florida.

From entry-level homes to luxury dwellings and active adult units, the company appeals to a broad range of homebuyers. And like Lennar, D.R. Horton seeks to streamline the homebuying process by offering mortgage financing and title services through its own financial services division.

As of March 31, 2025, D.R. Horton had a total homebuilding land and lot portfolio of 613,100 lots – a number that may have also caught the president’s eye. Of those lots, the company owned 25%. The remaining 75% is controlled through land and lot purchase contracts, which the company uses to strategically limit its direct land investment.

D.R. Horton is coming off a strong Q3 2025 performance, with $9.2 billion in revenue (though revenue did decline 7.31% YoY). Cancellation rates dropped one point YoY to 17%, a promising sign that most buyers can financially complete their home purchases. Additionally, D.R. Horton returned a substantial amount of capital to shareholders through share repurchases and dividends, with plans to buy back between $4.2 billion and $4.4 billion in common stock during fiscal year (“FY”) 2025.

Challenges exist, however…

• Net home orders were flat at just over 23,000.

• Average closing price dropped 3% YoY.

• Net income declined 24.3% YoY.

• Pre-tax income margins dropped from 17% to 13.8% YoY.

All that said, the D.R. Horton stock is still on sound financial ground, illustrated by our Stansberry Score. At 72 (B), D.R. Horton is our highest-rated builder of the three building giants.

D.R. Horton’s financials and capital efficiency are excellent. It’s a solid company with a long track record of success. You don’t become America’s largest homebuilder by accident.

The housing market overall, however, takes some of the shine off D.R. Horton, as it does with other homebuilders. Trump tariffs and rising costs can’t be ignored, and these have an impact on home prices, sales volume, and bottom lines.

The reality is that all homebuilders – no matter the size or footprint – are battling the same challenges… supply chain issues, tariffs on construction materials, and high interest rates to name a few. Our analysts agree.

When it comes to real estate, we like to turn to Brad Thomas, founder of Wide Moat Research, a corporate affiliate. Brad is a real estate developer by trade. Over the years, he has built for Walmart, Advance Auto, and many more. He’s also the author of several real estate investing books. In other words, he lives and breathes real estate.

Here’s what Brad had to say in a recent article about the troubles homebuilders are facing:

As I wrote on July 31, the U.S. housing market remains “a mess.” The spring season – typically the busiest time to buy and sell a home – was the worst it has been in over a decade.

Between high list prices, high mortgage prices (even if they did drop this month), and how debt-ridden consumers are… there’s not much incentive for people to buy a home these days. Which means there’s not much room for homebuilders to profit.

The president might want to see America’s homebuilders put out more inventory. But we like Brad’s take. Until some of the fundamental conditions improve, the homebuilding sector is an area to approach with caution.

With that said, here’s what we’ll be keeping an eye on.

Catalysts to watch

• Keep an eye on whether the FHFA’s proposed changes to their Affordable Housing Goals reduce the regulatory hurdles for high-volume builders such as D.R. Horton, Lennar, and PulteGroup. Less regulatory red tape will likely lead to an increase in homebuilding production… if costs aren’t prohibitive.

• Will mortgage rates fall? In September, the Federal Reserve cut its key rate and is forecasting several more cuts in the years ahead. Keep in mind that the Fed does not control long-term rates like mortgages. The central bank can only influence them. Therefore, the Fed cutting might help lending rates, but it’s no guarantee of lower mortgages. In fact, many experts predict that while mortgage rates may dip slightly, significant decreases are doubtful… Fannie Mae predicts the rates won’t fall below 6.4% before 2025 ends.

• If policy changes favorable to homebuilders are made, watch to see whether those tailwinds unlock upside in key homebuilding benchmarks.

• • Lot utilization: Policy changes could impact zoning and permitting. For example, changing zoning regulations to allow for smaller minimum lot sizes would potentially increase the number of units built in an area and improve land efficiency. Revisions to permitting processes would reduce building timelines as well as carrying costs for developers. And incentives that encourage building on vacant land within urban areas can begin to ease the affordable housing crisis.

• • Builder margins: For starters, reducing the tariffs on building materials would lower construction costs, allowing homebuilders to increase their margins. And policies aimed at affordability – including lower interest rates – would likely jumpstart buyer demand. Strong demand leads to higher home prices, which improve builder margins.

• • Volume: If any proposed policy changes manage to address both supply and demand, the country could be in for a much-needed housing boom. Otherwise, volume increases may depend on federal funding or government infrastructure spending that benefit the construction industries.

Final Takeaway for Investors on Trump’s Housing Strategy

Don’t underestimate the power of the presidential bully pulpit. Trump’s remarks on homebuilders may be bluster. But when he yells, markets respond. And his push to make America build again could signal actual policy reform ahead of the midterm elections.

Any housing policy change will impact major homebuilder stocks. The mere mention of housing in a Trump Truth Social post is enough to put the homebuilding industry on investors’ radars. And recognizing the catalysts could put you in prime position to take advantage if and when builder-friendly policy changes are enacted.

But for the time being, we’ll reiterate our warning: Approach the homebuilders with caution. All three mentioned above are solid businesses with long track records. But the industry in general is facing several headwinds. We’ll want to see substantial improvement in the economic fundamentals before fully endorsing the major homebuilders as a buy.

Regards,

David Engle

Editor’s Note: With AI’s huge impact on investing, businesses around the world are trying to determine how to best leverage AI to impact their bottom line. Even hedge funds are using AI to launch funds designed to beat the market.

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