By Shaina Mishkin

California-based builder KB Home lowered its earnings estimates, citing cautious consumers, higher mortgage rates, and geopolitical uncertainty. The revision was unwelcome news for home-builder stocks -- but all hope may not be lost for 2026 home sales.

Things were finally looking better for buyers earlier this year: Prices were rising relatively slowly, listings were ticking up, and, perhaps most importantly, mortgage rates had finally fallen below 6%, which economists often refer to as an important psychological threshold.

Those lower rates are now a thing of the past as concerns about energy costs and inflation send the 10-year Treasury yield higher -- and, by extension, mortgage rates. Mortgage News Daily on Tuesday pegged 30-year fixed mortgage rates at 6.55%, the highest level since August.

Demand has taken a hit: "Tepid consumer confidence, elevated mortgage interest rates and affordability pressures have stifled underlying demand," KB Home CEO Robert McGibney, who succeeded Jeffrey Mezger as CEO on March 1, said on a conference call. "More recently, the conflict in the Middle East has created more uncertainty for an already cautious consumer."

The company is now calling for deliveries of homes in a range from 10,000 to 11,500 this year, down from a 11,000 to 12,500 range. <<- suggest cut b/c repetition

Its revenue expectations moved lower, too: the company now expects housing revenue in a range from $4.8 billion to $5.5 billion in 2026, down from a range of $5.1 billion to $6.1 billion.

KB Home stock was down 4.5% in Wednesday trading as the Dow Jones Industrial Average and the S&P 500 were both roughly 0.9% higher. The decline extended to large builders: D.R. Horton, PulteGroup, and Lennar were down 2.6%, 1.4%, and 1.5%, respectively.

The environment might not be as bad as it looks for sales this year, UBS analyst John Lovallo wrote in a Tuesday note. "Recall mortgage rates were as high as 7.26% in January of 2025," he wrote. "Additionally, the 2025 spring selling season was completely derailed by Liberation Day tariffs on April 2 and immigration crackdowns at HD, LOW [ Home Depot and Lowe's] and home builder communities."

"In short, we expect KBH shares to hold up far better than the decline in estimates, which generally signals the market is anticipating a bottom is near," he added.

The long-term setup for housing is still good, McGibney said on the call. "We remain optimistic about the long-term housing market with favorable demographics supporting higher demand over time, together with the structural undersupply of homes," he said.

Meanwhile, the 10-year Treasury yield, which informs the direction of mortgage rates, will be the housing market signal to watch. The 10-year yield was down 0.04 percentage point on Wednesday, to 4.329%.

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

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March 25, 2026 12:28 ET (16:28 GMT)

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