Interest rates across the Treasury curve have moved to levels not seen since 2007, with the 10-year yield pushing above 5% this week. That shift is not confined to bonds: it feeds directly into mortgage rates, which remain one of the biggest pressures on homebuilders such as D.R. Horton.
D.R. Horton shares broke below the key $140 support level last month, rebounded, and have now returned to retest that area, which may now act as resistance. The stock is down 9% over the past month and 10% over the past three months, giving it a relative strength reading of 4 out of 10 versus the S&P 500. Homebuilders also continue to lag the broader market in both daily and weekly sector rotation measures, with no clear signal yet that the group is turning higher.
The next meaningful support level below is $131, while the broader bearish case is being reinforced by softer fundamentals. D.R. Horton trades at just above 11 times forward earnings, near the industry average, but that valuation may become less attractive if earnings estimates continue to decline. In July, the company cut its full-year revenue guidance by roughly $1 billion, citing margin pressure from buyer incentives and demand that has fallen short of expectations.
The company lowered its fiscal 2026 revenue outlook to a range of $32.5 billion to $33.0 billion, while orders increased only 0.1% year over year, compared with the roughly 6% growth analysts had expected. D.R. Horton was also offering mortgage-rate buydowns to 4.9% for buyers in its backlog, compared with a market rate of about 6.5% at the time of its July earnings call. With the 30-year mortgage rate since rising to 7%, a one-year high, future buydowns could become more expensive to provide.
Wall Street has also begun trimming expectations. Keefe, Bruyette & Woods lowered its D.R. Horton price target to $167 on July 22, while homebuilders continue to underperform the S&P 500.
Given the failed retest of $140, weak sector momentum, and a mortgage-rate backdrop that remains a headwind, traders may consider a defined-risk bearish put spread targeting further downside toward $120.
Trade idea: Buy the Nov. 20, 2026 140/120 put vertical for a $6.62 debit.
Legs:
Buy to open the Nov. 20, 2026 $140 put.
Sell to open the Nov. 20, 2026 $120 put.
Maximum reward: $1,338 if D.R. Horton is below $120 at expiration.
Maximum risk: $662 if D.R. Horton is above $140 at expiration.
Breakeven: $133.38, the level below which the trade begins to show a profit at expiration.
D.R. Horton entered the summer with growth expectations it has struggled to meet. The stock broke support, rebounded into a retest, and now sits near the area where sellers previously took control. With mortgage rates at a one-year high and the company’s July guidance cut already pointing to softer demand, the November put spread offers a limited-risk way to position for additional downside toward $120.