In this article, we will discuss 10 Best Affordable Housing Stocks to Buy.

Housing stocks offer investors a liquid, accessible way to gain exposure to the residential real estate market without the capital intensity or operational complexity of owning physical property. As the industry moves into 2026, the investment case is strengthening, supported by long-term structural housing demand, constrained supply across many U.S. markets, and a shifting interest-rate environment that increasingly favors borrowing. For investors seeking growth, income, and diversification, homebuilder equities provide a compelling entry point into a sector that sits at the intersection of demographics, policy, and macroeconomic cycles.

Fundamentally, demand for housing remains resilient. Years of underbuilding have created a persistent supply shortage, particularly in entry-level and affordable segments, underpinning long-term growth potential for homebuilders. Unlike direct real estate investments, housing stocks can be bought and sold instantly through brokerage accounts, allowing investors to scale exposure efficiently and respond quickly to market conditions. Moreover, as central banks transition toward easing monetary policy, declining mortgage rates could serve as a powerful catalyst for renewed homebuyer activity, directly supporting volumes, pricing power, and cash flows across the sector. Many established builders also return capital through dividends and buybacks, enhancing total return potential while improving portfolio diversification due to housing’s distinct cyclical behavior relative to other asset classes.

Importantly, recent developments have added a near-term bullish catalyst. According to a report sourced from Seeking Alpha, homebuilder stocks rallied sharply on February 3 following media coverage of a privately funded “Trump Homes” proposal aimed at addressing the U.S. housing supply and affordability crisis. Under the concept, builders would sell entry-level homes into a pathway-to-ownership program backed by private investors, potentially targeting up to one million homes and more than $250 billion in housing value.

While risks remain – housing stocks are sensitive to interest rates, economic slowdowns, and margin pressure from labor and materials costs – the balance of factors currently skews favorably. The combination of structural undersupply, easing financial conditions, shareholder-friendly capital returns, and emerging policy-driven demand tailwinds makes housing stocks particularly attractive at this stage of the cycle. With sentiment still cautious and valuations not yet pricing in a full recovery, the sector presents a timely opportunity for investors positioning ahead of a potential housing upturn.

With this context in mind, here is a list of 10 best affordable housing stocks to buy.

Our Methodology

For this article, we used the Finviz stock screener to compile a list of the top housing stocks. We then selected 10 stocks with a forward P/E ratio of below 15. We also included the hedge fund sentiment for each stock, which was sourced from Insider Monkey’s database, as of Q3 2025. The stocks are ranked in ascending order of hedge fund holders.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).

10 Best Affordable Housing Stocks to Buy

10. KB Home (NYSE:KBH)

Forward P/E: 10.90

Number of Hedge Fund Holders: 31

On January 16, BofA analyst Rafe Jadrosich raised the firm’s price target on KB Home (NYSE:KBH) to $63 from $58 while maintaining a Neutral rating on the shares. In a year-ahead note on the homebuilding group, the firm noted that while homebuilder stocks have rallied sharply year-to-date after underperforming in 2025, fundamentals are likely to face pressure through 2026. BofA expects weaker employment and migration trends, persistent inflation, and a more competitive selling environment driven by elevated new and resale inventory to make 2026 a “reset year” for the sector.

Despite these macro headwinds, KB Home (NYSE:KBH) delivered solid operating results in fiscal 2025. During its fourth-quarter earnings call, the company reported total revenues exceeding $6.2 billion for the year, along with nearly $430 million in net income. These results supported a 10% increase in book value per share, reflecting disciplined execution and balance sheet strength even amid a challenging housing backdrop.

Founded in 1957 as Kaufman & Broad, KB Home (NYSE:KBH) is a long-established American homebuilder headquartered in Los Angeles, California. The company focuses on building customizable homes across multiple U.S. markets, positioning it to benefit over the longer term from housing demand trends, even as near-term industry conditions remain mixed.

9. LGI Homes, Inc. (NASDAQ:LGIH)

Forward P/E: 11.74

Number of Hedge Fund Holders: 33

On January 7, Citizens analyst James McCanless raised the firm’s price target on LGI Homes, Inc. (NASDAQ:LGIH) to $95 from $85 and reiterated an Outperform rating after assuming coverage of the stock. The analyst highlighted several near-term catalysts, including the company’s monthly unit closing releases for December 2025 and potentially January 2026, which could provide incremental visibility into demand trends ahead of LGI Homes’ fourth-quarter earnings report.

Operationally, LGI Homes, Inc. (NASDAQ:LGIH) continues to expand its community footprint. The company recently announced the upcoming launch of its Monte Vista Collection in the Modesto, California area at the end of January. Management emphasized the value proposition of the new community, noting that the homes will include more than $50,000 in upgrades at no additional cost to buyers, along with energy-saving solar systems included in the purchase price—features that could support affordability and buyer interest in a competitive housing environment.

Founded in 2003, LGI Homes is a Texas-based homebuilder focused on new construction and residential developments, primarily in the southwestern United States. The company targets first-time and entry-level buyers with affordable, move-in-ready homes, positioning it to benefit from long-term housing demand while near-term operational updates serve as key catalysts for the stock.

8. Tri Pointe Homes, Inc. (NYSE:TPH)

Forward P/E: 14.76

Number of Hedge Fund Holders: 33

On January 9, RBC Capital lowered its price target on Tri Pointe Homes, Inc. (NYSE:TPH) to $31 from $37 while maintaining a Sector Perform rating, reflecting a cautious outlook for the homebuilding sector heading into early 2026. The firm pointed to persistent affordability pressures, uncertainty around interest rates, policy shifts, and tariffs as factors likely to keep the group volatile. While RBC sees the potential for repair and remodeling demand to improve later in the year, it expects homebuilders to remain under pressure in the near term, with relative value appearing more attractive in select building products and distribution segments.

Despite the guarded macro backdrop, Tri Pointe Homes, Inc. (NYSE:TPH) delivered solid operational results in the third quarter of 2025. The company closed 1,217 homes, surpassing the upper end of its guidance, at an average selling price of $672,000, generating $817 million in home sales revenue. Looking ahead, management plans to expand its community count by 10% to 15% by the end of 2026, supported by increased activity in the Central and Eastern regions, which could help diversify geographic exposure and support longer-term growth.

Tri Pointe Homes, Inc. (NYSE:TPH), founded in 2009 and headquartered in Incline Village, Nevada, is a diversified homebuilder with operations across multiple U.S. markets, including the West, Central, and East Coast regions. In addition to home construction, the company provides financing and insurance services, offering a more integrated platform that may help support margins and customer demand through varying housing cycles.

7. M/I Homes, Inc. (NYSE:MHO)

Forward P/E: 8.32

Number of Hedge Fund Holders: 38

M/I Homes, Inc. (NYSE:MHO) is among the best affordable housing stocks to buy. On January 7, Citizens analyst James McCanless initiated coverage of M/I Homes (MHO) with an Outperform rating and a $165 price target, citing a favorable medium-term setup despite near-term margin and earnings pressure. While the firm remains cautious on gross margins over the next few quarters, it sees several catalysts supporting the investment case. Notably, M/I Homes has meaningful exposure to the Midwest and Plains states, which remain more affordable relative to the Southeast, helping sustain demand in a higher-rate environment. In addition, the company’s entry-level Smart Series continues to gain traction, delivering above-average gross margins while addressing affordability constraints for first-time buyers.

Operational performance further supports the outlook. During the Q4 2025 earnings call in January 2026, M/I Homes reported record results in its financial services segment, with capture rates reaching 93% for the full year and mortgage capture at 94% in the fourth quarter. The segment generated pretax income of $56 million for the year, including $8.5 million in Q4, underscoring the value of its vertically integrated model. M/I Homes, Inc. (NYSE:MHO) ended 2025 with 232 active communities, up roughly 5% year over year, and opened 81 new communities during the year, with management expecting the average community count to rise by another 5% in 2026.

Founded in 1976 and headquartered in Columbus, Ohio, M/I Homes, Inc. (NYSE:MHO) is a national homebuilder focused on designing, constructing, and selling single-family homes and townhomes. Its combination of geographic diversification, a strong entry-level offering, and growing contribution from financial services positions the company to navigate near-term housing headwinds while maintaining a solid long-term growth profile.

6. PulteGroup, Inc. (NYSE:PHM)

Forward P/E: 11.44

Number of Hedge Fund Holders: 42

On February 4, Raymond James raised its price target on PulteGroup, Inc. (NYSE:PHM) to $145 from $140 and reiterated an Outperform rating, citing resilient Q4 results despite a challenging backdrop for the homebuilding industry. The firm continues to view PulteGroup as a best-in-class operator, supported by diversified buyer demographics, balanced geographic exposure, and a highly disciplined approach to capital allocation, which has allowed the company to outperform through multiple housing cycles.

Operationally, PulteGroup, Inc. (NYSE:PHM) delivered strong full-year performance in 2025, closing more than 29,500 homes and generating $16.7 billion in home sale revenues, while reporting net income of $2.2 billion, or $11.12 per share. Management also announced plans to divest its off-site manufacturing operations (ICG), sharpening its strategic focus on core homebuilding while still benefiting from third-party off-site innovation. This capital-light shift is expected to enhance returns and free up capital for reinvestment and shareholder value creation.

Founded in 1950 and headquartered in Atlanta, PulteGroup, Inc. (NYSE:PHM) remains well-positioned to navigate near-term housing volatility while sustaining long-term profitability.

5. Meritage Homes Corporation (NYSE:MTH)

Forward P/E: 10.00

Number of Hedge Fund Holders: 43

As of February 3, Keefe Bruyette analyst Jade Rahmani lowered the firm’s price target on Meritage Homes Corporation (NYSE:MTH) to $76 from $78 while maintaining a Market Perform rating, citing the challenging homebuilding environment and near-term industry headwinds.

During its Q4 2025 earnings call, Meritage Homes Corporation (NYSE:MTH) reported a 15% year-over-year increase in ending community count, reaching a record 336 communities. The company opened 35 new communities in the fourth quarter and over 160 for the full year, reflecting a strategic focus on expanding geographic reach and product availability. Management anticipates a further 5%–10% increase in community count in 2026, positioning the platform to capture demand as market conditions recover. Moreover, Meritage Homes returned approximately $179 million to shareholders in the fourth quarter through a combination of buybacks and dividends, underscoring a commitment to shareholder value.

Meritage Homes Corporation (NYSE:MTH) is a Scottsdale, Arizona-based real estate development company that constructs single-family detached homes across the United States. Founded in 1985, the company continues to pursue measured growth amid a cautious housing market.

4. Taylor Morrison Home Corporation (NYSE:TMHC)

Forward P/E: 9.97

Number of Hedge Fund Holders: 45

With a forward P/E ratio of 9.97, Taylor Morrison Home Corporation falls 4th on the list of best affordable housing stocks to buy. On January 16, BofA downgraded Taylor Morrison Home Corporation (NYSE:TMHC) to Neutral from Buy, raising the firm’s price target to $70 from $68. The firm lowered its 2026 EPS estimates by 6%, with the updated EPS now approximately 18% below consensus. While the stock remains attractive on valuation, BofA flagged downside risk relative to consensus EPS due to potential lower deliveries compared with peers.

During its 2025 third-quarter earnings call, the company reported solid results and highlighted strategic initiatives, including the launch of an AI-powered digital assistant to enhance the homebuying experience through dynamic, data-driven guidance. Taylor Morrison Home Corporation (NYSE:TMHC) currently owns or controls 84,564 homebuilding lots and anticipates opening over 100 new communities in the coming year, reflecting continued portfolio expansion.

Headquartered in Scottsdale, Arizona, it is one of the largest homebuilders in the United States. Founded in July 2007, Taylor Morrison Home Corporation (NYSE:TMHC) focuses on developing single-family homes and master-planned communities, combining scale with technology-driven customer engagement to support long-term growth.

3. Toll Brothers, Inc. (NYSE:TOL)

Forward P/E: 10.25

Number of Hedge Fund Holders: 51

Toll Brothers is among the best affordable housing stocks to buy. On January 16, BofA raised the firm’s price target on Toll Brothers, Inc. (NYSE:TOL) to $160 from $150, maintaining a Buy rating on the shares. While homebuilder stocks have rallied sharply year-to-date after underperforming in 2025, BofA cautioned that weaker employment and migration trends, ongoing inflation, and a more competitive selling environment driven by elevated new and resale inventory could pressure fundamentals through 2026, making it a “reset year” for the sector.

During its Fourth Quarter Fiscal Year 2025 earnings call, Toll Brothers, Inc. (NYSE:TOL) delivered strong results despite the challenging sales environment, closing 11,292 homes at an average price of $960,000 and generating a record $10.8 billion in home sales revenue. These metrics highlight the company’s ability to maintain pricing power and operational scale in a competitive market, underscoring long-term potential.

Headquartered in Fort Washington, Pennsylvania, Toll Brothers, Inc. (NYSE:TOL) is a leading American homebuilder specializing in the construction, marketing, and financing of residential and commercial properties. Founded in 1967, the company focuses on luxury and premium communities across the United States, combining high-end offerings with strategic growth initiatives.

2. D.R. Horton, Inc. (NYSE:DHI)

Forward P/E: 12.59

Number of Hedge Fund Holders: 61

On January 27, Keefe Bruyette lowered the firm’s price target on D.R. Horton, Inc. (NYSE:DHI) to $163 from $168 while maintaining a Market Perform rating on the shares, reflecting a more cautious outlook for the homebuilding sector amid affordability pressures and elevated incentives.

During the company’s Q1 2026 earnings call on January 20, D.R. Horton, Inc. (NYSE:DHI) outlined solid forward guidance, projecting Q2 consolidated revenues of $7.3–$7.8 billion and homebuilding closings of 19,700–20,200 units. Management expects home-sales gross margins of 19.0%–19.5% and a consolidated pretax profit margin of 10.6%–11.1%, while noting that housing starts should increase sequentially in Q2. Although incentives are expected to remain elevated and sensitive to mortgage rate trends, the company continues to generate significant shareholder returns, planning approximately $2.5 billion in share repurchases and about $500 million in dividends.

Founded in 1978 and headquartered in Arlington, Texas, D.R. Horton, Inc. (NYSE:DHI) is one of the largest homebuilders in the United States. Its scale, disciplined capital return strategy, and ability to adjust production and incentives position the company to navigate near-term market challenges while remaining well-placed for a housing demand recovery over the longer term.

1. Lennar Corporation (NYSE:LEN)

Forward P/E: 13.57

Number of Hedge Fund Holders: 63

On January 13, Goldman Sachs raised its price target on Lennar Corporation (NYSE:LEN) to $125 from $120 while maintaining a Neutral rating, citing mixed housing signals toward year-end. The firm’s channel checks suggest housing activity slowed into the fourth quarter, prompting builders to rely on higher incentives to sustain new-home closings, which in turn pressured gross margins despite modest revenue beats. Goldman added that while building product companies are generally positioned to meet conservative EPS guidance, upside in Q4 results may be limited by cautious 2026 outlooks amid reduced visibility into demand trends.

During Lennar’s fourth quarter 2025 earnings call, the company highlighted strong operational execution, delivering 23,034 homes and expanding its community count to 1,708, representing an 18% year-over-year increase. Lennar Corporation (NYSE:LEN) also improved efficiency by reducing cycle time to 127 days from 138 days and boosting inventory turns to 2.2x from 1.6x a year earlier. The balance sheet remains a key strength, with $3.4 billion in cash and total liquidity of $6.5 billion at quarter-end, alongside $3.2 billion returned to shareholders during fiscal 2025.

Founded in 1954 and headquartered in Miami-Dade County, Florida, Lennar Corporation (NYSE:LEN) is one of the largest homebuilders in the U.S., and its scale, liquidity, and operational discipline provide flexibility to manage near-term margin pressure while positioning the company to benefit when housing demand stabilizes.

While we acknowledge the potential of LEN as great affordable housing stock to buy, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than LEN and that has 100x upside potential, check out our report about this cheapest AI stock.

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