While tech investors lick their wounds from the AI software selloff, a forgotten corner of the market is quietly on fire.
Homebuilder stocks are crushing it in 2026. The SPDR S&P Homebuilders ETF (XHB) has surged 17% year-to-date, dramatically outperforming a broader market that started the year slightly in the red. PulteGroup (PHM) is up 21.5%. Toll Brothers (TOL) is up nearly 23%. And the rally shows no signs of slowing down.
This isn’t random. A powerful rotation is underway. Capital has been flowing out of high-multiple growth names — particularly technology and software stocks hammered by what some are calling the “SaaSpocalypse” — and into more defensive, asset-backed sectors. Homebuilders, with their real physical assets and reasonable valuations, are catching the wave.
The fundamental backdrop is even more bullish. The United States is staring at a structural housing shortage estimated at 4 million homes, on top of the 1.5 million units needed annually just to meet baseline demand. Recent government data showed housing starts jumping a higher-than-expected 6.2% in December to their highest level in five months. If borrowing costs ease while demand stays firm, builders are sitting on a goldmine.
The valuations are shockingly reasonable for stocks with this kind of momentum. PulteGroup trades at just 12.8x earnings with a consensus Moderate Buy rating. Last quarter, the company delivered $2.96 EPS versus the $2.86 estimate, on $4.4 billion in revenue. Toll Brothers is even cheaper at 12.25x earnings, and it’s trading just 2% below its all-time high.
For investors looking for broad sector exposure, XHB offers a diversified play across homebuilders, building products, and construction materials. The ETF has been consolidating in a multi-year range with support near $100 and resistance around $126. A sustained breakout above that ceiling could signal a much bigger move ahead.
Here’s the kicker: these stocks aren’t just riding temporary sentiment. The housing shortage isn’t going away, and the Fed’s eventual rate cuts — whenever they arrive — should provide additional tailwinds as mortgage rates ease. Meanwhile, the sector’s low valuations provide a margin of safety that overstretched tech stocks can only dream about.
While everyone’s chasing the next AI name, the real money in 2026 might be in the companies literally building America’s future homes.