Homebuilders set for another ‘lost’ earnings season

For US homebuilders, the Iran war dashed what little optimism they had left for this earnings season. 

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Developers including D.R. Horton Inc., Lennar Corp. and KB Home all missed expectations last quarter and estimates suggest both sales and earnings have fallen further as conflict in the Middle East unsettled buyers and raised costs.

Just as the spring selling season starts, the Iran war has pushed up oil prices and squeezed household budgets, adding volatility to an already fragile economy. Mortgage rates have also jumped back on renewed inflation concerns, while higher oil prices are expected to push up the cost of construction materials. 

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As a result, homebuilders could face another “lost year,” Barclays analysts led by Matthew Bouley wrote. Elevated inventories may force builders to continue relying on incentives, which eats into margins, he added.

US homebuilders’ confidence fell to a seven-month low in April as a result of the array of setbacks, while analysts have largely cut their earnings estimates across the sector. KB Home saw the largest negative revision to 2026 adjusted earnings over the past year. 

“There will be pressure on orders,” Bloomberg Intelligence analyst Drew Reading said, noting that rising economic and employment uncertainty is prompting consumers to delay big decisions.

Purchases such as homes or major remodels are being pushed to the sidelines until confidence improves, with recent geopolitical tensions adding to the hesitation.

Continued Pain

Even before the conflict, the sector was losing momentum. KB Home cut its full-year delivery and home-sales revenue guidance, while Lennar cautioned that geopolitical turmoil could affect its delivery target. 

Even luxury builder Toll Brothers Inc. has not been immune to softer demand and issued a delivery forecast for the quarter that fell short of estimates. “No builder is going to be immune from what’s happening with mortgage rates, consumer confidence and things like that,” Reading said. 

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Now the Iran war will add to the pain, undoing developers’ efforts to lower direct costs — including materials and labor — as rising oil prices lift the outlays for petroleum-based products such as asphalt roofing and PVC, Reading said.

About two-thirds of US homebuilders have already reported higher material prices tied to increased fuel costs, according to the National Association of Home Builders.

Suppliers tied to housing also flagged similar trends. Flooring maker Mohawk Industries Inc. said weak housing turnover and low consumer confidence have limited renovation activity mostly to higher-income or essential projects. Roofing and insulation manufacturer Owens Corning’s outlook took into account continued weak construction and repair momentum. 

HVAC maker Carrier Global Corp. expects “flattish” sales, citing soft residential construction, while building materials producers Vulcan Materials Co. and Martin Marietta Materials, Inc. both pointed to muted housing demand as partially affecting sales. 

High diesel prices will also increase extraction, processing and freight costs, BI industrials analyst Spencer Liberman wrote in a note.

A meaningful recovery to the spring selling season is unlikely without a “quick and decisive end” to the conflict, which will be the only way to get buyers budging, Truist analyst Jonathan Bettenhausen wrote.