Wedbush analysts downgraded various housebuilders in a note to clients Tuesday, stating they believe the stocks could see a seasonal price decline.
The firm downgraded Century Communities (NYSE:CCS) (price target cut to $82 from $92), D. R. Horton (NYSE:DHI) (price target maintained at $130), Lennar Corp. (NYSE:LEN) (price target maintained at $144), LGI Homes (NASDAQ:LGIH) (price target cut to$74 from $88), and Meritage Homes Corporation (NYSE:MTH) (price target cut to $148 from $155) to Underperform from Neutral.
"Our EPS estimates are unchanged for all 5 names," said analysts. "No year in homebuilding ever follows a precise timeline of perfectly rising demand in the spring followed by a seasonally normal decline in demand into the summer."
However, they note that 2024 has been the most "normal" year they have seen for the home building industry since 2019 in terms of normal seasonality. As a result, they "believe these names could see a normal seasonal stock price decline into the summer, especially after the seasonal trade window."
When it comes to mortgage rates, the firm said it does not see near-term catalysts that will pull mortgage rates lower.