Is the toughest time for selling homes in the past? Investors seem to think so.
Hopeful earnings commentary from home builder KB Home, a drop in bond yields, and Berkshire Hathaway's interest in the industry ignited a rally in home-building stocks.
The shares still have plenty of room to run, Barron's technical analysis shows. The price of the iShares U.S. Home Construction ETF, a fund tracking home builders, could climb nearly 30% higher by the end of the year.
Builder profit margins and sentiment in the industry have been stymied by a postpandemic rise in buying costs. But those following the industry "can start to see this light at the end of the tunnel," says Rick Palacios, Jr., the director of research at John Burns Research and Consulting.
Investors caught on, earlier this week sending the long-suffering iShares U.S. Home Construction exchange-traded fund past $100 for the first time since April.
Viewing the overall lens of the home-building space through the iShares ETF, one is immediately impressed with its one-month return of 14%. This pure-play home construction fund has its five largest holdings as actual home builders, unlike the State Street SPDR S&P Homebuilders ETF, which includes no home builders in its top four holdings.
A recent decline in the 10-year Treasury yield -- a barometer for mortgage rate movements -- helped bring life back to the builders fund. An easing of geopolitical tensions related to the war in Iran helped pull the 10-year Treasury yield to its lowest level since May 8 on Wednesday, according to Dow Jones Market Data.
So did Berkshire Hathaway's interest in the space. The conglomerate now helmed by Greg Abel said in late May that it would buy the mid-cap home builder Taylor Morrison. The purchase boosted builder shares, with mid- and small-cap builders reaping the greatest gains.
But the catalyst for the group to take off was earnings from KB Home, a roughly $3.8 billion builder of first-time and move-up homes. KB's sales rebounded in April and held strong in May despite a run-up in mortgage rates, executives said on a conference call.
After breaking through $100, the iShares fund's trading shows more gains could be coming. Looking at the daily chart, the fund appears to be building the right side of a cup base on its ratio chart versus the broader consumer-focused State Street SPDR S&P Retail ETF. A stock showing relative strength against its industry group is significant because it indicates investors are favoring that company over its peers, often signaling superior fundamentals, stronger momentum, or leadership within the sector.
Another encouraging technical development is the bullish RSI, or relative strength index, divergence that formed in March and May -- often a sign that downside momentum is weakening.
The ETF previously attempted to break out above an inverse head-and-shoulders pattern near the $106 level but failed to hold that move. Earlier in the year, a bear flag developed between mid-February and mid-March, though the fund successfully reversed course and broke above that pattern on April 8 with a gap higher of more than 5%, signaling renewed buying interest.
A bullish hammer candle on May 19 helped initiate the right side of a double-bottom base -- significant because it signals that selling pressure may be exhausted and a potential trend reversal or rally could be beginning -- with a breakout trigger forming at $103.34. The fund closed right at that level on Wednesday, putting it in position for a potential breakout.
A move toward $133 by year-end would represent 29% upside from current levels. Investors should remain bullish above $98. The iShares U.S. Home Construction ETF was trading around $104.50 on Friday.
For home builders, the path of interest rates remains one of the most important variables to watch. Long-term Treasury yields significantly influence mortgage rates, directly impacting housing affordability and buyer demand.
Investors can keep their eyes on the iShares 20+ Year Treasury Bond ETF that Barron's wrote about recently . If the fund continues to stabilize and move higher, it implies lower long-term yields and potentially easing mortgage rates, which is a favorable backdrop for home-building stocks. While company-specific execution remains important, a more supportive rate environment could provide a meaningful tailwind for the sector in the months ahead.
Investors sent KB Home stock screaming higher by 17% following a well received earnings reaction -- its first positive reaction in its last eight financial reports. Its daily chart implies that rise won't be the last this year for the leading mid-cap home builder's stock, which is up 16% year to date and 27% over the past month.
"Our year is progressing with expected further sequential improvement in quarterly deliveries, revenues, and gross margin in the back half of fiscal 2026," executive chairman Jeffrey Mezger said on a Tuesday call discussing its results.
The stock recently broke above a four-month downtrend on its ratio chart versus the iShares U.S. Home Construction ETF, an encouraging sign of improving relative strength. Another positive development is the 50-day simple moving average turning higher for the first time since the fourth quarter of last year, suggesting momentum may be shifting in favor of the bulls.
KB Home was trading around $61 Friday.
The recent rally began shortly after a doji candle formed on May 19, a pattern that often signals a potential change in trend. On Wednesday, the stock pushed above both its 200-day simple moving average and a double-bottom pivot at $57.65. While a previous breakout attempt above $66.36 failed despite a bullish island reversal in January, the current setup appears stronger from a technical standpoint.
This week's advance of 14% would mark the stock's best weekly gain in nearly two years and puts it on track for its first six-week winning streak in more than 27 months. Given the strength and momentum behind the move, the breakout appears more likely to hold. A move toward $84 by year-end would represent 37% upside from current levels. Investors should remain bullish above $57.
Write to Shaina Mishkin at shaina.mishkin@dowjones.com and Doug Busch at douglas.busch@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 26, 2026 11:00 ET (15:00 GMT)
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