We recently published an article titled Why These 15 Real Estate Stocks Are Plunging In 2025.In this article, we are going to take a look at where Smith Douglas Homes Corp. (NYSE:SDHC) against the other real estate stocks.

The real estate market has been hit by a lot of bad news in the first three months of this year, and it looks like it will only get worse in the coming months. Mortgage rates have remained elevated and are a pain for buyers. The Federal Reserve holding higher for longer with very slowly moderating inflation is not going to solve that problem anytime soon.

Lawrence Yun, chief economist at NAR, noted that consumers are gradually adapting to a new normal of mortgage rates between 6% and 7%.

There’s a lot of uncertainty about where this market could go. Prices are still high, and the Trump administration may still force the Fed to push rates lower. On the other hand, the trade wars combined with an AI slowdown could knock the entire market down, and the real estate market could fall significantly in such a scenario.

Some real estate stocks have already started falling, and there’s a good chance that some of them are already below their intrinsic value.

Methodology

For this article, I screened the worst-performing real estate stocks year-to-date.

I will also mention the number of hedge fund investors in these stocks. 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).5 Countries with the Largest Urban Population in the World

Aerial view of a large urban cityscape showcasing a major real estate development.

Smith Douglas Homes Corp. (NYSE:SDHC)

Number of Hedge Fund Holders In Q4 2024: 10

Smith Douglas Homes Corp. (NYSE:SDHC) is a real estate company that sells single-family homes in the southeastern United States. It targets entry-level and empty-nest homebuyers.

The stock is down significantly so far in 2025 as Bank of America downgraded Smith Douglas Homes from "neutral" to "underperform" and slashed its price target from $33 to $22 in January.

Analysts also noted that the company's return on equity (ROE) is expected to decline as delivery growth moderates and margins normalize.

Plus, rising mortgage rates have dampened demand for entry-level homes. This is the core market for the company, and higher lot costs and construction cost inflation have also squeezed margins across the homebuilding sector.

Story Continues

The company is set to release its fourth-quarter 2024 financial results on March 12, 2025.

The consensus price target of $25.4 implies 15.11% upside.

Smith Douglas Homes Corp. (NYSE:SDHC) stock is down 14.20% year-to-date.

Overall SDHC ranks 10th on our list of the real estate stocks that are plunging in 2025. While we acknowledge the potential of SDHC as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SDHC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.

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