Warren Buffett’s Berkshire Hathaway, which is now run by Greg Abel, revealed in its latest 13F filing that the fund bought a new stake in D.R. Horton (NYSE:DHI), worth about $580,000. The fund also increased its stake in fellow homebuilder Lennar (NYSE:LEN) by 30% in the second quarter, lifting that position to about $1.2 billion.
The housing market has been taking a hit amid higher mortgage rates, but some long-term indicators suggest a rebound could come. J.P. Morgan Global Research expects home prices to remain flat in 2026 but sees a 3% rise in 2027. Capital Economics forecasts a 2.5% rebound in home prices in 2027, followed by a 4% gain in 2028. The Mortgage Bankers Association expects single-family construction starts to recover to 967,000 in 2027 and 976,000 in 2028, after dipping in 2026.
D.R. Horton
DHI is one of the largest homebuilders in the country. In the most recent quarter, gross margin actually beat guidance at 20.7% even as prices slipped amid declining construction costs. The stock is down 10% over the past year. Bulls point out that a broader housing recovery is expected sooner or later and DHI is a strong play to benefit from it in the long term.
Bear case
Bears say a recovery would take a lot of time. The company recently cut its full-year revenue guidance and Q4 guidance calls for a sequential slowdown in both revenue and homes closed. Elevated mortgage rates, sticky inflation, and cautious buyers are forcing DHI to lean on incentives and lower average prices to keep volume moving and these pressures are not expected to ease soo.
Forward non-GAAP P/E sits at 13.95x, about 13% below the sector median of 15.99x, but 40% above DHI’s own five-year average of 9.99x. On a GAAP basis, forward P/E of 13.96x is below the sector median by roughly 19%, yet sits 40% above the stock’s five-year norm.
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Lennar (NYSE: LEN)
Lennar (NYSE: LEN) is down about 34% over the past year. The company’s fiscal Q2 results showed its incentives on deliveries are falling, the first real decline in three years, and management calls it a sustainable trend. Lower incentives mean the company keeps more of each sale price, which is why gross margin rose.
Construction costs are falling too. Cost per square foot dropped 7% year over year to $81, and it’s down 13% from its peak. Build times hit a record low of 121 days. Inventory turn improved to 2.5x from 1.8x a year ago.
Management also pointed to unusually strong attention from Washington on housing affordability, and said federal action could be a tailwind for the sector, though nothing concrete has been announced yet.
