Meritage Homes Likely to Increase Homebuyer Incentives Amid High Mortgage Rates, Truist Says

09:03 AM EDT, 09/16/2026 (MT Newswires) -- Meritage Homes (MTH) and other homebuilders will likely need to increase buyer incentives amid elevated mortgage rates and weak demand, Truist Securities said in a Wednesday client note. The brokerage lowered its full-year 2027 estimates for several homebuilding companies across its coverage, including D.R. Horton (DHI), Meritage Homes, Lennar (LEN) and KB Home (KBH), on higher input costs related to lumber, tariffs, crude oil and diesel prices. Mortgage rates and softening demand trends are likely to make it difficult for builders to pass some of the costs through in pricing, according to Truist. "With mortgage rates surging above 7% (and showing no signs of slowdown), we think builders are going to have to once again ramp incentive usage, reversing course from the last few quarters," Truist's senior analyst, Jonathan Bettenhausen, wrote in the note. Mortgage applications in the US declined for the week ended Sept. 11, as the 30-year fixed rate for conforming loan balances of $832,750 or less increased to 6.97% from 6.85%, the Mortgage Bankers Association said Wednesday. Truist downgraded its rating on Meritage Homes shares to hold from buy, citing the increased risk of incentive ramping. The brokerage previously saw the potential for a "recovery-driven" incentive decline at the company, but now sees this as unlikely for the "foreseeable future." "We now see increased risk of incentive ramping, thus the quick incentive pull through to gross margin that we found appealing when incentives were coming down could start to work the other way and be a headwind compared to the group," according to Bettenhausen. In July, Meritage Homes said it expected home closing volume and revenue in 2026 to be around 5% below last year's results, but noted that home closing revenue could trend lower if market conditions require higher incentives. Still, Truist expects Meritage Homes to be one of the first homebuilders to benefit from an industry recovery, but that would depend on mortgage rates coming down consistently to at least a low 6% range, improving consumer confidence, among other factors. "However, we see no imminent sign of entry level market recovery," according to Bettenhausen. Lennar is scheduled to release its latest financial results after the markets close Wednesday, while KB Home is slated to release its quarterly earnings next week.