Three Homebuilders I'm Buying as Real Estate Market Heats Up
Let's inspect the housing stocks as lower rates are driving home sales as the peak spring selling season approaches.
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It’s cold in much of the U.S. right now, but spring is just around the corner. And spring is traditionally the high season for home sales. The housing market has been in the doldrums, since it peaked in a frenzy of pandemic-driven buying in the early part of this decade.
The quiet U.S. housing market, however, is showing signs of life. According to data from the National Association of Realtors, sales of existing homes in the U.S. have been steadily rising for the past six months.
Meanwhile, new home sales in the U.S. are also gaining momentum:
Activity in the real estate market has been spurred by lower interest rates. According to Mortgage News Daily, the average rate on a 30-year fixed rate mortgage has fallen from about 8% in October of 2023 to just above 6% today.
Lower rates are also causing current homeowners to rethink their mortgages. Earlier this week, CNBC reported a 40% increase in demand for refinancing.
Homebuilding stocks are surging on the renewed demand for housing. Since Jan. 8 (point A), the bellwether S&P Homebuilders ETF (XHB) has jumped by nearly 11%. That move occurred on heavy volume, a sign of institutional participation (arrow).
Let’s scan the charts of the homebuilding stocks to see which names in this sector are best positioned to rally in 2026.
Toll Brothers
Toll Brothers (TOL) closed at a 52-week high earlier this week (point A). The Fort Washington, Pa.-based builder of luxury homes has formed a saucer pattern over the past four months (shaded yellow).
Despite pulling back with the broader market on Wednesday, this stock remains about 1% from a breakout to a fresh 52-week high. GRADE: A
Cavco Industries
Unlike Toll Brothers, which is known for its luxury homes, Cavco Industries (CVCO) focuses on manufactured and modular homes. Shares of Cavco have gained 51% over the past six months.
On Wednesday, Cavco closed at an all-time high. The stock has closed higher for eight consecutive sessions. Cavco shares are currently overbought, according to its RSI (relative strength index) indicator. GRADE: B+
Champion Homes Inc.
Like Cavco Industries, Champion Homes (SKY) is known for lower-cost manufactured and modular homes. Shares of Troy, Michigan-based Champion have gained 43% over the past six months.
Champion is currently struggling to break through a resistance level formed last May (point A). If the stock can vault that obstacle, there is little preventing a subsequent rise to $110. GRADE: B
Bottom Line
Rates are likely to continue moving lower in 2026. There is a pool of potential buyers that have been locked out of the housing market due to the combination of high prices and high mortgage rates. Instead of playing favorites, I'm buying Toll Brothers, Cavco, and Champion as a basket.
At the time of publication, Ponsi was long TOL, CVCO, and SKY.
