Multiple homebuilding stocks flashed sell signals Tuesday after industry leader D.R. Horton (DHI) reported sluggish sales trends as homebuyers choose to wait for lower mortgage rates.

D.R. Horton was the worst-performing stock in the S&P 500, down more than 9% in midday trading after paring some losses. Shares of the Arlington, Texas-based company fell below the 200-day moving average for a while and undercut a flat base that had been forming the past seven weeks.

The homebuilder's third-quarter earnings fell 12% to $3.92 a share while sales fell 5% to $10 billion. Both missed the consensus analyst estimates. While homebuyers are finally seeing lower borrowing rates, the company says they're reluctant to buy until rates fall some more.

"While mortgage rates have decreased from their highs earlier this year, many potential homebuyers expect rates to be lower in 2025," D.R. Horton CEO Paul Romanowski said in an earnings-call transcript from FactSet. "We believe that the volatility of rates, combined with general uncertainty during the election season, is causing some buyers to stay on the sidelines in the near-term."

Romanowski called buyers "a little less motivated today than they were previously in prior quarters," even if quarterly sales were in line with normal seasonality.

"I don't think this is a structural issue with demand," the CEO added. "There's just a lot of noise in the market today. The rate volatility we've seen combined with, you know, the election news that's out there, I just think we're seeing people take a pause."

D.R. Horton is the nation's largest homebuilder, with operations in 125 markets spread across 36 states. In Q3, it closed on 89,690 homes, plus nearly 4,000 rental homes and about 2,200 multifamily rental units. It is also the largest homebuilding stock, with a market cap of more than $50 billion.

Homebuilding Stocks Trigger Sell Signals

The news shook the homebuilding industry group, making it one of the five worst-performing groups Tuesday. Construction products, wood products and other related industry groups also were among the worst performing.

As D.R. Horton stock fell, sell signals were abundant in the homebuilding group, even as some pared losses.

M/I Homes (MHO) fell further below its 50-day moving average and is nearly 13% below a 173.69 handle buy point, according to IBD MarketSurge pattern recognition.

Toll Bros. (TOL) gapped below its 50-day line in heavy volume, signaling a break of support.

NVR (NVR) gapped further below its 50-day line. Meritage Homes (MTH) is 17% below the 210.58 entry of a brief breakout from an irregular base on Sept. 19.

Century Communities (CCS) gapped below its 200-day moving average. But some stocks including Beazer Homes (BZH), Hovnanian (HOV), Lennar (LEN) and Tri Pointe Homes (TPH) found support at their 200-day lines.

The iShares U.S. Home Construction ETF (ITB) was down nearly 4%, after dropping to a nearly 11-week low.

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