Homebuilders 2025 Outlook: 'More Cautious, Less Constructive,' Analyst Says

JPMorgan analysts delivered a grim outlook for homebuilders on Friday as the firm moves to a "more cautious, less constructive" approach toward the industry. 

The JPMorgan analysts, led by Michael Rihault, gave multiple reasons for the shifted 2025 outlook. Renault pointed to several key housing demand drivers, including affordability, interest rates and employment growth, as unlikely to improve significantly in 2025. 

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The level of existing homes for sale is rising in many key markets. New home supplies remain plentiful, the analyst noted. As a result, Rihault sees growth in home prices to moderate over the next year, slowing to a flat to slightly upward trend. 

JPMorgan analysts expect the incoming Trump administration's immigration policies to be potentially disruptive to the homebuilding industry due to the largest percentage of immigrants in the construction workforce since 2004. 

Additionally, Rihaut sees return on equity and earnings growth slowing in 2025 with more downside risk than upside to gross margins and home sales pace. 

JPMorgan downgraded several homebuilders and lowered its price targets on the stocks. 

Downgrades: 

• JPMorgan’s Rehaut downgraded D.R. Horton, Inc. DHI from Neutral to Underweight and lowered the price target from $188 to $156.

• Rehaut also downgraded Toll Brothers, Inc. TOL from Overweight to Neutral and lowered the price target from $166 to $150.

• JPMorgan downgraded Meritage Homes Corp. MTH from Overweight to Neutral and lowered the price target from $220 to $197.

Price Action: Shares of all three home builders are trading lower on Friday, according to Benzinga Pro. Toll Brothers shares are down 2.74% at $134.66, D.R. Horton shares are down 1.37% at $149.14 and Meritage Homes shares are down 4.72% at $169.07.

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