It’s a new year and new Wall Street forecasts are coming out fast and furious. Most strategists are forecasting that the S&P 500 will rise about 12% in 2025 and that the economy will keep growing this year. That does not mean that all sectors have to rise equally. Some sectors may even flop.

It looks like 2025 is setting up as a tough year for the homebuilder stocks. Some value investors may take aim after a huge drop, but tactical and opportunistic investors are going to worry about the poor housing end of 2024 and the setup for 2025. There are simply too many other aspects of the market that are holding up quite well.

Many U.S. homebuilder stocks have seen their shares gutted by 20% and 30% in just the last month. Wall Street is downgrading these stocks faster than they can build a track home as their 2025 expectations are being dialed down.

One key issue driving the ability to buy and sell homes at the moment is that interest rates are just not coming down for mortgages and long-term loans. This leaves the market open for cash buyers, but many sellers don’t want to sell a home with a 3% mortgage and buy a home with a 7% mortgage. And labor costs, regulatory costs and input costs have building costs through the proverbial roof.

Photo by Jon Ogg of construction scene looking rather messy

A new regime is coming into power as Donald Trump is set to become the 47th President of the United States. The new regime will have changes to regulations, policies, taxes and many more aspects to the economy. Some homebuilders have even already started jacking up their prices with the “tariffs will drive up prices excuse, even though the tariffs have not even gone into effect and even though most content used for a home under construction have already been purchased.

But as for those mortgage rates, the problem now is that longer Treasury yields have stayed high because of multiple issues. The most obvious is that the Fed may be done or close to done cutting interest rates already, far short of what was expected just a few months ago. Policy uncertainty is keeping the bond market on edge. Inflation isn’t looking the 2% Fed hurdle will be happening. And the rising deficit and $1.1 billion-plus in annual debt servicing costs are all now adding to the concerns for bond investors.

On last look, the 10-year Treasury yield was 4.64%. That is up almost 40 basis points since the election, and it’s roughly a full percentage point (100 basis points) than versus the end of September. And the only people who have been buying homes in the last 60 days seem to be investors or those who simply had no choice but to buy a home.

No wonder Wall Street is so negative on the views of the homebuilders for 2025. Most homebuilder stocks have seen multiple downgrades from analysts who are also generally taking their price targets lower. Tactical Bulls has shown these calls and shown the price target actions taken as well. Each rating and price target is assigned to the firm which issued the calls in the last 30-day period. Tactical Bulls does not maintain any formal price targets or ratings on any of the companies mentioned in this report.

DR Horton Inc. (NYSE: DHI) stock -14% from last month and -30% from year high at $139.36

• Citi (Neutral) target to $152 from $185 (Jan. 6)
• Wells Fargo (Overweight) target to $175 from $190 (Dec. 17)
• JPMorgan downgraded to Underweight from Neutral and target to $156 from $188 (Dec. 13)
• Barclays downgraded to Equal Weight from Overweight and target to $170 from $192 (Dec. 11)
• KBW downgraded to Market Perform from Outperform and target to $183 from $200 (Dec. 10)

Lennar Corp. (NYSE: LEN) stock -19% from last month and -30% from year high at $135.06

• Citi (Neutral) target to $150 from $196 (Jan. 6)
• Goldman Sachs (Neutral) target to $162from $190 (Dec. 23)
• UBS (Buy) target to $205 from $225 (Dec. 20)
• KBW (Outperform) target to $170 from $210 (Dec. 20)
• Barclays (Equal-Weight) target to $135 from $181 (Dec. 20)
• Wells Fargo (Equal-Weight) target to $145 from $165 (Dec. 20)
• RBC (Underperform) target to $130 from $160 (Dec. 20)

PulteGroup (NYSE: PHM) stock -16% from last month and -27% from year high at $108.93

• Pulte saw one of the few analyst upgrades to kick off 2025 as Wedbush raised its rating to Outperform from Neutral with a $135 price target.
• Citi (Neutral) target to $119 from $146 (Jan. 6)
• Barclays downgraded to Equal Weight from Overweight and target to $140 from $150 (Dec. 11)
• Wells Fargo (Overweight) target to $140 from $165 (Dec. 17)

Toll Brothers Inc. (NYSE: TOL) stock -19% over last month and -26% from year high at $126.10

• Citi (Neutral) target to $137 from $155 (Jan. 6)
• Raymond James (Buy) target to $165 from $170 (Dec. 16)
• JPMorgan downgraded to Neutral from Overweight and target to $150 from $166 (Dec. 13)
• KBW downgrade to Market Perform from Outperform and target to $164 from $168 (Dec. 10)

Where things get interesting in the housing sector is in the suppliers. Things are not as dire there, but investors have to wonder if they can remain as high if the builders are serring up for a weaker 2025 than previously expected.

Shares of The Home Depot, Inc. (NYSE: HD) were last seen down at $389.37. That is down 9% over the last month and down 11% from its 52-week high that was just seen in late-November. Finviz shows its consensus price target at $436.38 and the 10% pullback was not on wave after wave of downgrades like in the actual homebuilder stocks.

Lowe’s Companies, Inc. (NYSE: LOW) was last seen down over 8% in the last month and down 13% from its 52-week that had been seen in October. Lowe’s recently closed at $249.74 and Finviz shows its consensus analyst price target as $284.94.

Tactical Bulls would point out that homebuilders are not the only facet of the housing market. They are also not always representative of the economy as a whole. That said, housing is a huge market and if the housing market is seized up and if people cannot afford to move, it does have broader implications on other aspects of the economy — like taking a new job, moving cities/neighborhoods, discretionary spending, travel, remodels, and even auto spending.