Investing.com -- Analysts at J.P. Morgan said they were adopting a more cautious stance on U.S. homebuilders for 2025, amid a challenging demand and supply environment, margin pressures, and full valuations. Brokerage downgraded key stocks in the sector on expectations of slowing earnings growth.
J.P. Morgan downgraded D.R. Horton Inc (BVMF:D1HI34) to "underweight" from "neutral," as it expects stock to underperform relative to peers.
Toll Brothers Inc (NYSE:TOL) and Meritage (NYSE:MTH) Homes were also cut to "neutral" from "overweight."
Whereas, brokerage upgraded Century Communities (NYSE:CCS) to "neutral" from "underweight", while maintaining "overweight" ratings on PulteGroup Inc (NYSE:PHM) and Taylor Morrison (NYSE:TMHC) Home.
The analysts see little improvement in major housing demand drivers, including interest rates, employment growth, and affordability.
Supply conditions are also expected to normalize, with existing home coming to typical levels and new home availability increasing, weighing on home prices, which were projected to remain flat or only slightly up next year.
There is also a chance that Trump administration policies could potentially disrupt housing’s labour force, as immigrants account for the largest percentage of U.S. construction workers since 2004.
Valuations in the sector are stretched, with both price-to-earnings and price-to-book ratios hovering near mid-cycle levels. Brokerage lowered its price targets for homebuilder stocks by an average of 10%, reflecting reduced expectations for sector upside in the coming year.
Homebuilders saw volatility in 2024, driven by swings in Treasury yields and mortgage rates. Following a strong finish in 2023, builder stocks softened in the first half of 2024 before rebounding sharply in the third quarter.
But the recent pullback has stoked concerns as rates reversed course and fundamentals continue to moderate.
Related Articles
JPM downgrades key homebuilder stock amid challenging supply-demand dynamics
European markets mostly down a day after ECB rate cut; Munich Re soars
US lawmakers tell Apple, Google to be ready to remove TikTok from app stores on Jan. 19
免责声明:投资有风险,本文并非投资建议,以上内容不应被视为任何金融产品的购买或出售要约、建议或邀请,作者或其他用户的任何相关讨论、评论或帖子也不应被视为此类内容。本文仅供一般参考,不考虑您的个人投资目标、财务状况或需求。TTM对信息的准确性和完整性不承担任何责任或保证,投资者应自行研究并在投资前寻求专业建议。