Market context and firm action
Wolfe Research has reduced its forward estimates for public homebuilders as the industry moves into earnings season, citing an expectation that second-quarter gross margin guidance will come in below consensus again. The brokerage noted that the group has fallen roughly 20% since February 13.
Upcoming reporting and relative performance
The homebuilder reporting period begins Tuesday, April 21, when D.R. Horton is scheduled to release second-quarter results ahead of the opening bell. Wolfe highlighted that the builder cohort is down about 20% since February 13 versus a roughly 1% decline for the S&P 500 over the same window.
Demand and seasonal trends
According to Wolfe's analysis, first-quarter demand tracked below normal seasonal patterns. Commentary from Lennar and KB Home points to a spring selling season that has not yet fully developed. The firm also cited a near 50 basis-point increase in mortgage rates through March and noted that the conflict in Iran likely weighed on homebuyer sentiment.
Guidance expectations and timeline
Wolfe expects second-quarter gross margin guidance to disappoint relative to consensus, mirroring the shortfall experienced in first-quarter guidance. The firm warns that these pressures could carry into the third quarter. In its February survey, Wolfe found no indication from private builders that public firms had materially cut back on incentives so far this year.
Historical context and firm positioning
Wolfe's study of prior U.S. military conflicts suggests home sales have generally been little affected historically, but the firm points out that the conflicts in Panama in 1989 and Desert Shield in 1990 produced meaningful impacts on demand over the subsequent three months. Despite the headwinds, Wolfe believes most have been reflected in share prices: the homebuilder group fell about 14% since February 28 while the S&P 500 declined roughly 1% in the same span.
Heading into earnings, Wolfe continues to favor Meritage Homes and Taylor Morrison.
Summary takeaway
Wolfe Research is scaling back expectations for public homebuilders and anticipates another round of below-consensus margin guidance as companies report. Weaker spring demand, higher mortgage rates and geopolitical uncertainty are cited as contributors to softer buyer sentiment, and the firm is selectively favoring specific builders ahead of results.