By Shaina Mishkin

Home builder stocks were dropping on Wednesday after cautious guidance from home improvement retailers offered little hope for big housing market improvement this spring.

The iShares U.S. Home Construction exchange-traded fund was down 3.4%, on track for its largest percentage decline since mid-July, according to Dow Jones Market Data.

Disappointing guidance and cautionary notes about housing demand from two large home improvement retailers were likely behind the slide. Lowe's on Wednesday linked softer-than-expected guidance to an expensive housing market in which existing homeowners are hesitant to move.

"A persistent lock-in effect remains in place, keeping housing turnover and new home starts under pressure, leading us to expect improvement in both the housing and home improvement markets to be gradual," Barron's previously reported CEO Marvin R. Ellison said on the call.

Home Depot on Tuesday offered a similar message. "There are a number of dynamics we are observing that are pressuring housing and home improvement demand," Home Depot CFO Richard McPhail said on a conference call. Among them: buyers are still facing elevated housing costs due to a combination of mortgage rates and home prices, while housing turnover remains low.

"Our customers also tell us, they have concerns over general economic uncertainty, including inflation, growing job concerns, and higher financing costs," McPhail said. "As we look ahead to fiscal 2026, we anticipate these pressures will persist as we have not yet seen a catalyst for an inflection in housing activity."

It isn't the kind of housing market omen investors in the sector were hoping at the start of the typically busy homebuying season. After last year's disappointing spring, hopes were high that lower mortgage rates would spur more moves this year.

Big builders were among the companies bearing the brunt of dampened housing expectations on Wednesday: D.R. Horton and PulteGroup were both down 5.1% in morning trading, while Lennar was down 5.3% -- all on pace for their largest one-day percentage declines this year, according to Dow Jones Market Data.

Housing signals so far have been mixed, though none have shown a clear sign of a strong pickup in purchases. Applications for loans to purchase a home have remained higher than year-ago levels, but they haven't had the same pickup as refinance applications, which were 150% higher than one year prior during the week ended Feb. 20, Mortgage Bankers Association data showed Wednesday.

Write to Shaina Mishkin at shaina.mishkin@dowjones.com

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February 25, 2026 11:15 ET (16:15 GMT)

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