A number of beaten-down homebuilding stocks rebounded on Friday, leading a short list of advancing issues on the S&P 500 after the industry escaped tariffs on lumber. NVR and D.R. Horton led the rebound, with Lennar and PultePHM not far behind. A housing market stock index was up nearly 3%.
Collectively, the 25-stock group gained 2.7% in midday trading. On a day when sellers remained in control of the stock market, that ranked among the 10 best of 197 industry groups. But other housing market groups didn't fare so well. The mortgage lending group was down 2%, in the top 25% of group performance Friday.
Tariff exceptions for Canada and Mexico "amount to a major win" for homebuilders, the National Association of Home Builders said in a statement. Canada accounts for about 85% of all U.S. softwood lumber imports and for nearly a quarter of the U.S. available supply.
Exemptions for Mexican products also favors the industry because it affects key construction cost drivers such as gypsum, concrete and near-shored appliances.
"While the complexity of these reciprocal tariffs makes it hard to estimate the overall impact on housing, they will undoubtedly raise some construction costs," NAHB Chairman Buddy Hughes said. "However, NAHB is pleased President Trump recognized the importance of critical construction inputs for housing and chose to continue current exemptions for Canadian and Mexican products, with a specific exemption for lumber from any new tariffs at this time."
Falling Rates May Help Housing Market
Meanwhile, the yield on the 10-year Treasury note has fallen more than 30 basis points this week, to 3.90%. It is below the 4% level for the first time in six months. Falling borrowing rates tend to favor the housing market.
For now at least, homebuilding stocks need to dig themselves out of a deep hole.
The group ranks No. 186 out of IBD's 197 industry groups and has been in the cellar for about a month.
Nearly all of the homebuilding stocks in IBD's database are trading below their 200-day and 50-day moving averages. However, NVR rallied more than 5% on Friday and retook its 50-day line for the first time since November. D.R. Horton staged a 5% gain that petered out just as it met resistance at its 50-day moving average.
Lennar and Pulte each gained more than 3%. D.R. Horton, Lennar, NVR and Pulte are the four largest stocks in the industry group, by market capitalization.
The iShares U.S. Home Construction ETF reversed higher 2.8% Friday morning. It is down almost 10% year to date and touched a December 2023 low.
