By Shaina Mishkin

Home-builder revenue will largely drop in 2026 as the housing market remains under pressure, one analyst wrote Wednesday. It's good timing for investors eyeing specific builders, he added.

Truist analyst Jonathan Bettenhausen initiated coverage of eight builders on Wednesday. PulteGroup, Toll Brothers, Taylor Morrison Home, and Meritage Homes are rated Buy, while D.R. Horton, Lennar, NVR, and KB Home are rated Hold.

Don't expect much help from the housing market. Revenue will largely be down this year, Bettenhausen noted. But buyer demand looks like it could bottom this year, he wrote -- as could margins, which have long been pressured by builders' offers of discounts and deals to keep homes selling in a slow environment.

That could position builders for "notable" earnings growth in 2027, Bettenhousen wrote. "We recommend investors start positioning now for a 2027 upcycle, as the home builders typically move early on the first signs of a new cycle."

Of the analysts' buys, the largest builder is PulteGroup. Bettenhausen initiated coverage with a $170 price target.

"The market is meaningfully mispricing the company's profitability potential over the next few years," he wrote, noting the builder has "ample opportunity" to pull back on the kind of incentives that pressure builders' margins over the coming two years.

PulteGroup's "rich" supply of optioned lots "allows for incrementally more efficient capital allocation from the management team and, in our view, likely keeps PHM as a top share repurchaser in our group," he wrote.

The analyst's other picks could benefit from other tailwinds. Luxury home-builder Toll Brothers, for example, "is somewhat insulated from the affordability issues facing low end builders," he wrote, noting that "any green shoots in the resilient luxury home market in 2027" would be a plus. He has a $190 price target.

The smaller-cap Taylor Morrison isn't trading at the valuation it should be, Bettenhausen wrote, noting that the stock is trading at one-times book value versus the 1.2-times valuation the analyst sees as appropriate. Truist's price target on Taylor Morrison is $85.

Meritage, an Arizona-based builder with a roughly $4.8 billion market cap, stands out by building entirely speculative, or spec, homes, which are constructed before a buyer signs a contract.

"This means that there is no customer personalization, but also allows them to offer a 60-day closing guarantee and compete directly with existing home sales," the analyst wrote. That strategy could result in significant cost-savings, he added. The company's price target is $90.

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

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March 04, 2026 11:00 ET (16:00 GMT)

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