In the month to September 28, the iShares U.S. Home Construction ETF fell 9.9%. PulteGroup lost 9.8%, Lennar 8.1% and D.R. Horton 7%. Over the same stretch the 10-year Treasury yield rose above 5% for the first time since 2007.
Property stocks had a similar month. Real estate investment trusts fell 5.7% in September, according to Nareit, and by September 29 the S&P 500 real estate sector stood 18.3% below its all-time high, further from its peak than any other sector.
Why builders track yields
Builders have been selling homes by paying down buyers’ mortgage rates. Lennar said its prices last quarter reflected incentives of about 12%. When market rates rise, each buydown costs more. Higher yields hit builders twice: fewer buyers qualify, and each sale costs more to close.
It is showing up in margins. Lennar’s gross margin on homes fell to 15.8% from 17.5% a year earlier. KB Home’s fell to 16.5% from 18.2%, and its management said conditions had weakened since June.
Our read
Builder shares have become a bet on the 10-year yield. They would likely rebound quickly if yields fall, but until the Fed signals it is done hiking, the squeeze on margins has further to run.
Sources
- Nasdaq, rising yields hit homebuilder stocks, Sep 28, 2026
- Nareit, REITs fell in September
- First Trust, S&P 500 sectors vs. all-time highs
- Lennar, Q3 2026 results (8-K)
- KB Home, Q3 2026 results (8-K)
- U.S. Treasury, daily yield curve rates, September 2026
This is information, not a recommendation to buy, sell or borrow. Read our investment disclaimer.