Homebuilder Stocks Poised for Growth into 2026, Says UBS Analyst John Lovallo

Positive Outlook for Homebuilders in 2026

• 🎯 UBS analyst John Lovallo believes 2026 will be a better year for the housing market, with the underlying building blocks firmly in place.
• 📈 Key factors supporting this outlook include right-sized inventory across most markets, persistently strong intent to buy, and a 100 basis point decline in mortgage rates since January.
• 💰 Lovallo notes that builder inflation on input costs is moderating, and despite recent market shifts, the setup for homebuilder stocks still feels good, trading at nine times forward earnings.

Home Prices and Equity

• 🏠 Despite a potential pullback in recent months, Lovallo is not concerned about home prices falling, citing that home price appreciation since 2019 is up 56%.
• 🏦 There is still $35 trillion in home equity built up in people's homes, providing a buffer against significant price declines.
• ⚠️ While consumer confidence is currently low, Lovallo anticipates stabilization and improvement moving into next year.

Builder Advantages and Stock Performance

• 🛠️ Lovallo highlights that homebuilders have an affordability advantage over the existing home market, enabling them to buy down mortgage rates, build smaller homes, and limit floor plans for efficiency.
• 🚀 He predicts that when consumer confidence bottoms out and sentiment improves, homebuilder stocks will rip, likely together.
• 📊 Current stock valuations reflect significant pessimism, suggesting they are in an early cycle phase and poised for a rebound when margins are perceived to bottom out.