Grading 3 Promising Homebuilder Stocks as a Housing Revival Looms

It’s been a quiet year in the real estate industry. Buyers and sellers circle each other, but are having difficulty finding middle ground.

According to contacts in the industry, buyers are having trouble qualifying for loans at current interest rates and prices, while sellers are in no hurry to move on from that 2.5% mortgage they obtained during the pandemic. In many locations, the result is a standoff, with few transactions going through.

Do better times for the housing market lie ahead? Lumber prices have collapsed, and could fall further if nearby support is breached (black dotted line). 

Falling lumber prices may be helping to build a foundation for the homebuilder sector. In late August, homebuilder stocks, represented below by the S&P Homebuilders ETF XHB, reached their highest level this year (green arrow).

Homebuilder stocks have spent the better part of this year forming a rounded bottom (shaded yellow). The bullish formation could foreshadow the resurgence of a sector that has received little attention in 2025.

Which names in the sector are best positioned to benefit from a housing revival? Let’s go to the charts to find out.

1. D.R. HORTON (DHI)

This is one of the strongest names in the group. On Wednesday, D.R. Horton DHI closed at its highest level this year. Since early June, the stock has climbed 48%. 

D.R. Horton needs to close a few gaps left over from late last year (points A and B). From there, the stock could rise to its all-time high, just below $200 (black dotted line). 

GRADE: A-

TOLL BROTHERS (TOL)

The rounded bottom from the above chart is also visible here (shaded yellow), but this stock is stronger than its sector. On Wednesday, Toll Brothers TOL reached its highest price in six months. 

Toll Brothers’ second quarter report, released in late August, demonstrated considerable strength, as the company beat earnings and revenue expectations handily.

GRADE: B+

PULTEGROUP (PHM)

Shares of PulteGroup PHM closed at their year-to-date high on Wednesday, but just below an area of moderate resistance (point A). A stronger resistance area lies ahead just below $150 (black dotted line). 

GRADE: B-

On the surface, there is little reason to get excited about the housing sector.

However, the market is a discounting mechanism, and could be factoring in potentially positive developments in the housing sector six to 12 months down the road. The charts are telling us that it makes sense to buy homebuilder stocks before everyone wants a piece of the action. 

At the time of publication, Ponsi was long DHI and TOL.