Homebuilders make money by selling houses that buyers can afford to finance. Right now, financing is expensive, and buyers are walking away. NVR extended the rally with a premarket jump of more than 26% on Monday, after Democrats won control of the Senate and House in Tuesday's midterm elections and builders took off anyway.
What the election could change
UBS told clients that Democratic control of Congress could improve the odds of lower tariffs on building materials, which the brokerage estimates add about $7,500 to the cost of a new home. A bigger deduction for state and local taxes could also give households in high-tax states more money to spend.
UBS also cited two bills, the More Homes on the Market Act and the First Home Affordability Act, which it said could help more homes change hands and make buying easier for first-time buyers.
D.R. Horton, Lennar, and PulteGroup climbed about 7% to 8% on Nov. 4, and the iShares U.S. Home Construction ETF gained 7.5%. NVR's premarket surge has its own recent history.
Builders Led the Post Election Jump
Single-day gain on Nov. 4, 2026, %
Bar chart. Gain (%). D.R. Horton: Gain (%) 8.30%. Lennar: Gain (%) 7.90%. PulteGroup: Gain (%) 7.90%. iShares Home Construction ETF: Gain (%) 7.50%. Toll Brothers: Gain (%) 6.40%.
Source: Source: Yahoo Finance data via iShook Finance
Lawmakers take office in January. Realtor.com senior economist Jake Krimmel said a divided government leaves little room for legislation, since a Democratic House and Senate would have to make a deal with the Republican White House or win enough Republican votes to override a veto.
The order book says otherwise
NVR's third-quarter new orders fell 7% to 4,391 homes, and its cancellation rate rose to 21% from 19% a year earlier. Homebuilding gross profit margin narrowed to 18.3% from 21.0%, squeezed by higher lot costs, which is the price of land, and by pressure to lower prices because homes are hard to afford.
D.R. Horton's fourth quarter looked similar, with net sales orders down 7% to 18,619 homes and order value off 9% to $6.6B. Cancellations rose to 23% from 20%, and management expects continued high incentives, such as discounts, and more margin pressure in fiscal 2027.
Cancellations are the clearest warning sign, because they mean buyers who signed contracts are backing out.
Buyers Are Backing Out More Often
Cancellation rate, year-earlier quarter vs latest reported quarter, %
- NVR
- D.R. Horton
Line chart. Cancellation Rate (%). Year earlier: NVR 19%, D.R. Horton 20%. Latest quarter: NVR 21%, D.R. Horton 23%.
Source: NVR and D.R. Horton quarterly results, 2026
NVR's third-quarter net income fell 27% to $248.6M as consolidated revenue slipped to $2.40B.
Demand data keeps sliding
The median US home-sale price was $388,604 in the four weeks ending Nov. 1, down 0.4% from a year earlier. That is the third straight week of annual declines after three years of increases.
Pending sales dropped to 275,484, the lowest in Redfin's records going back to 2021. New listings fell too, to the lowest level since January, as sellers pulled back. The median monthly mortgage payment eased to $2,777, a five-week low, and the supply of homes for sale would last 4.6 months at the current sales pace.
Freddie Mac's weekly survey on Oct. 29 put the 30-year mortgage rate at 7.24%, down from 7.32%.
Mortgage applications fell 1.2% in the week ended Oct. 30 even as rates eased, the Mortgage Bankers Association said. The Institute for Supply Management's October services report showed construction shrinking. For a third straight month, it was the only industry reporting fewer new orders. The US housing market still has a shortage of roughly 4 million homes, according to a March report from Realtor.com.
How to think about exposure
The rally prices in policy that is still only a proposal. The housing bill fight has a history. The order books show buyers who can't make it to closing.
Gestiehr, the firm's director of wealth management, says builders need better demand, affordability, and profit margins before the gains can last. He also sees a risk in demand-side fixes, since adding buyers without adding supply can push prices up.
Owning a builder index fund spreads the risk of any one company across the group, and margin guidance points the same way. The pressure on builders has its own story. D.R. Horton ended September with $7.2B in liquidity, which is cash and available credit, and returned $4.1B to shareholders in fiscal 2026.
The thing to watch is whether cancellation rates stop climbing, since every other number in the sector depends on signed contracts actually closing.
