The U.S. housing market closes 2025 at an inflection point. Supply remains structurally constrained, mortgage rates have begun to ease, and the Federal Reserve has entered a more accommodative stance after holding rates at restrictive levels for nearly two years.

With the central bank delivering its third quarter-point cut of the year on Dec. 10—bringing the benchmark range to 3.5%-3.75%—optimism is building that 2026 could mark the beginning of a gradual housing rebound.

Fed officials now expect only one more cut next year, yet the improved outlook for GDP growth, inflation moderation and a slightly lower projected unemployment rate suggests that affordability conditions may slowly improve.

Against this backdrop, homebuilders with strong execution, disciplined land strategies and operational flexibility are positioned to benefit if mortgage rates continue easing into 2026. Lennar (LEN Quick QuoteLEN - Free Report) , Century Communities (CCS Quick QuoteCCS - Free Report) and Green Brick Partners (GRBK Quick QuoteGRBK - Free Report) stand out as well-placed to capture incremental demand as sentiment improves.

Macro Conditions Are Turning More Supportive

The macro backdrop entering 2026 remains mixed but directionally constructive. Inflation is still elevated—roughly a full percentage point above the Fed’s 2% target—but continues to trend lower. The most recent core PCE reading — released by the Commerce Department — showed a 2.8% increase in September, up from 2.7% in August.

The labor market has softened meaningfully, with several months of volatile job creation, though the September rebound to 119,000 payroll additions suggests the market is not collapsing. Fed Chair Jerome Powell acknowledged the dual challenge — inflation remains too high while labor-market risks linger. 

Yet policymakers boosted their 2026 GDP growth outlook to 2.3% from 1.8% and expect inflation to ease to 2.5% from 3% in 2025, setting the stage for improving household confidence.

The shift in mortgage rates is equally important. The 30-year fixed rate has slipped to 6.19% as of Dec. 4, its second weekly decline and down half a percent from a year ago. While still far above the pandemic-era lows, the downward drift marks the first meaningful easing in affordability pressure in over a year. With housing supply shortages still pervasive—particularly in Sun Belt and Mountain West markets—any improvement in financing conditions can translate quickly into stronger new-home demand. Builders with cost discipline, solid margins and land in high-growth regions appear best placed to capture this next phase of the cycle.

Lennar: Positioned to Leverage a Cost-Efficient Platform

Lennar enters 2026 with one of the strongest operational setups in the industry. Affordability pressures required heavier incentives in 2025, weighing on fiscal third-quarter margins at 17.5%, but the company preserved volume and efficiency through disciplined pricing and its steady “even-flow” production approach. Late-quarter mortgage rate declines also improved traffic and buyer interest, offering early signs of stabilizing demand heading into 2026.

Cost discipline remains a major advantage. Direct construction costs have fallen in 10 of the past 11 quarters, cycle times have improved to a record 126 days, and inventory is tightly managed with fewer than two completed unsold homes per community. Lennar’s asset-light land strategy, supported by more than 523,000 owned or controlled homesites and over $5 billion in liquidity, allows this Zacks Rank #2 (Buy) builder to scale quickly if mortgage rates approach 6% next year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Although LEN stock has plunged 22.8% in the past year, analysts remain optimistic. The Zacks Consensus Estimate for fiscal 2026 EPS has inched up to $9.07 from $9.01 over the past month, depicting 9.9% growth on 2.2% expected revenue expansion.

Century Communities: Improved Operations Fuel Growth

Century Communities navigated a soft 2025 demand backdrop by tightening execution and reducing costs. In the third quarter of 2025, it delivered 2,486 homes and posted a 20.1% adjusted homebuilding gross margin, supported by a 3% year-to-date drop in direct construction costs and faster cycle times averaging 115 days, with a third of divisions already at 100 days or less. Affordability remained central as economic uncertainty kept buyers cautious, and adjustable-rate mortgages gained traction, rising to nearly 20% of the third-quarter originations from under 5% early in the year. Century Communities also expanded its community base, up 5% year over year, and expects further growth heading into 2026. With more than 62,000 lots and a stronger balance sheet, the company is positioned for a potential demand rebound.

Notably, CCS stock has lost 25.9% in the past year. Nonetheless, with a Zacks Rank #2, Century Communities’ Zacks Consensus Estimate for 2026 EPS has remained unchanged at $7.57 over the past 30 days, indicating 34.2% growth on 7.2% expected revenue improvement.

Green Brick: Margin Strength and Land Advantage

Green Brick Partners remains one of the sector’s most profitable builders, sustaining gross margins of more than 30% even as affordability pressures prompted greater incentives in 2025. Third-quarter 2025 margins reached 31.1%, aided by a favorable warranty adjustment tied to better build quality. Sales trends stayed firm, with net orders up 2.4% year over year to a record third-quarter level and cancelations improving to 6.7%. Its focus on infill and infill-adjacent communities in fast-growing Texas markets continues to support pricing power. The company controls more than 41,000 well-located lots, giving it a long margin runway. Construction costs declined, cycle times improved and low leverage at 15.8% positions Green Brick to pursue growth as it expands into Houston in 2026.

GRBK stock has gained 1.2% in the past year. With a Zacks Rank #2, GRBK’s Zacks Consensus Estimate for 2026 EPS has increased to $6.89 from $6.77 over the past 60 days, indicating a 0.3% decline on 1.7% expected revenue improvement.

The 2026 Setup: Supply Imbalance Meets Gradual Rate Relief

The overarching theme heading into 2026 is simple — the U.S. remains dramatically undersupplied. Years of underbuilding combined with aging housing stock and demographic tailwinds have kept structural demand high. The easing of mortgage rates, even modestly, can spark meaningful incremental sales activity because the affordability equation is so finely balanced.

For Lennar, Century Communities and Green Brick Partners, the combination of lean cost structures, disciplined land strategies, expanding community counts and strong balance sheets places each in a favorable position to benefit from any improvement in buyer sentiment. As mortgage rates trend lower and economic growth stabilizes, these builders offer a compelling way for investors to position for a housing market recovery that appears increasingly plausible in 2026.