By Shaina Mishkin

Shares of U.S. home builders popped on Wednesday following Tuesday night's cease-fire news. Mortgage rates are likely headed lower with the 10-year Treasury, which could ease the headwinds buffeting builder profit margins.

The iShares Home Construction ETF was up 6.4% in early Wednesday trading -- its biggest gain since July 2025, according to Dow Jones Market Data. Three of the nation's largest builders, D.R. Horton, Lennar, and PulteGroup, were up 6.7%, 6.2%, and 5.5%, respectively.

The hope is that mortgage rates will head lower with long-term bond yields. The 10-year Treasury yield was dropping in morning trading.

Lower geopolitical risk is a compelling setup for builders, a team of 22v strategists led by Dennis DeBusschere wrote in a Wednesday note -- even as a big housing rebound is unlikely.

Home-builder stocks have had a tough start to the year as profit margins remained under pressure and quickly fluctuating mortgage rates called the dream of a spring home-sales rebound into question.

Home builders in the S&P 1500 are "technically oversold," the strategists wrote, noting that the group is down roughly 22% since mid-February. Such a pattern "has historically preceded strong relative outperformance," the note says.

A lower 10-year Treasury yield could reduce home affordability headwinds in the short-term by bringing mortgage rates lower. Housing costs have already improved, the strategists wrote in the note -- though "a meaningful recovery in affordability is unlikely; it is just less bad."

There could be hope for builders' margins, the analysts note, which have weakened as the companies have offered more buyer incentives to close sales. Builders' sentiment around margins has improved recently, according to the strategists' analysis of company commentary. "Margin sentiment and actual margins are coming from very low levels, but the rate of change improvement is interesting and presumably reduces downside EPS risk," the strategists wrote.

The environment for builders could get brighter from here. Just don't call it a housing rebound.

"We don't think housing activity will pick up FYI," they wrote. "Just that housing faces fewer headwinds, which is interesting in the context of the valuation derating and oversold condition."

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

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April 08, 2026 11:29 ET (15:29 GMT)

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