Buoyant Homebuilder Rally Counters Housing Market Woes

The seemingly unstoppable rally in homebuilding stocks may face a few potential roadblocks ahead.

In recent months, the group has been notching record after record, posting their best first half in almost a decade. Homebuilders even rose during the pandemic, stumbling just briefly in 2022, before regaining traction. The cohort is also outperforming the broader market — up more than 50% year-to-date versus the S&P 500’s 18% gain.

Still, analysts warn to watch for factors that could threaten the sector’s growth.

“Builders are in the business of building shelter capacity,” said Carl Reichardt, a homebuilders analyst a BTIG. “Shelter capacity right now is very low. So the headwind to the group is if shelter capacity that isn’t bought by the homebuilders increases.”

Homebuilder Rally Outruns S&P 500