Watch These Housing Related Stocks: RKT, TOL, ZG

Investor sentiment is rising for housing-related stocks, which are gaining traction as a result of recent and potentially ongoing interest rate cuts by the Federal Reserve.

Wall Street is betting that this will revitalize housing, especially as mortgage rates have dwindled near one-year lows at 6.34%. Despite current challenges, a more proficient supply and demand dynamic could come into play if homes become more affordable.

Most importantly, this would take pressure off homebuilders who have relied on price cuts and mortgage rate buydowns as strategic tools to stimulate demand and maintain sales momentum in a high-interest rate environment.

Toll Brothers Continues to Lead the Surge in Homebuilder Stocks

As a luxury homebuilder, Toll Brothers' TOL affluent customer base is less affected by higher rates, but its industry-leading margins could expand even more in a more favorable housing market.

Leading the rebound in homebuilder stocks, TOL has spiked over +20% in the last three months and currently lands a Zacks Rank #3 (Hold). The resurgence in Toll Brothers stock has been warranted considering its pricing power, although investor enthusiasm may be ahead of schedule for some of its peers. To that point, the Zacks Building Products-Home Builders Industry is currently in the bottom 5% of over 240 Zacks industries.

Still, Warren Buffett helped in sparking broader excitement for the space with Berkshire Hathaway upping its stake in leading single-family homebuilder Lennar Corporation LEN during Q2 despite trimming some of its position in D.R. Horton DHI.

Rocket Companies Has Stood Out Among Mortgage Providers

Making an aggressive push to become a fully integrated homeownership platform, Rocket Companies RKT has stood out among mortgage providers after recently completing a $14.2 billion all-stock transaction to acquire Mr. Cooper Group, the largest mortgage servicer in the U.S.

In July, Rocket Companies also acquired Redfin, expanding its reach into the home search market. Attracting investors' attention for its strategic vision in fintech, Rocket Companies' stock has soared +60% in 2025 but has pulled back from its 52-week high of $22 a share after Redfin has reported that pending home sales in the U.S. fell 1% year over year.

Landing a Zacks Rank #3 (Hold), Rocket Companies' stock has also been lifted by strong projected net interest income growth and exceptional return on equity (ROE).

Zillow Gains Analyst Upgrades, But Currently Lands a Zacks Rank #4 Sell

Notably, analysts are starting to call for more upside potential in Zillow Group ZG stock, seeing speculative fears of increased competition from emerging companies like Compass COMP and Open Door Technologies OPEN as overdone. Of course, Rocket Companies fits into this scope of potential online real estate and home search challengers.

That said, analysts at Gordon Haskett, DA Davidson, and Bernstein have upgraded Zillow’s stock and raised their price targets to over $90 a share. Hopefully, there will be a reversal to the overall consensus trend of declining earnings estimate revisions (EPS), which has landed ZG shares a Zack Rank #4 (Sell) at the moment. Trading around $74, ZG is up a modest +5% YTD.

Bottom Line

Although they may not be out of the woods yet in terms of the broader challenges the housing market has faced, investors have favored Toll Brothers, Rocket Companies, and Zillow stock. One thing is for certain: there will be pockets of opportunity for housing-related stocks as the Fed’s interest rate cuts should lower borrowing costs.

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This article originally published on Zacks Investment Research (zacks.com).

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