Forestar Group (FOR): A Deep-Value Land Developer Poised to Outperform as the Housing Sector Bottoms in 2026

The U.S. housing market, long shadowed by policy uncertainty and affordability challenges, is on the cusp of a cyclical rebound in 2026. According to Bank of America, the anticipated shift toward market-friendly policies under the Trump administration-including deregulation and de-escalation of trade tensions-will reduce macroeconomic volatility and create a more stable environment for housing demand. This macroeconomic tailwind positions land developers like Forestar Group (FOR) to capitalize on undervalued real assets as the sector bottoms. With a robust balance sheet, disciplined capital allocation, and a geographically diversified land portfolio, FOR is uniquely positioned to outperform in the near-term recovery.

Macroeconomic Tailwinds: A Policy-Driven Housing Rebound

BofA's analysis underscores that the 2026 housing recovery will be driven by a combination of reduced trade tensions and a steadier policy environment. These factors are expected to alleviate corporate and consumer uncertainty, which has dampened housing demand in 2025. For land developers, this means a reduction in the drag from policy-driven volatility, allowing companies like FOR to focus on optimizing returns from their existing asset bases. The firm's strategic positioning in a fragmented industry-where market share consolidation is likely as smaller players exit-further enhances its potential to capture gains during the rebound.

Financial Resilience and Attractive Valuation Metrics

Forestar's Q3 2025 results highlight its financial resilience amid a challenging market. Despite a 15% year-over-year decline in net income to $32.9 million, the company generated $390.5 million in revenue, a 23% increase, driven by higher lot sales and average selling prices. Its liquidity position remains robust, with $792.0 million in total liquidity-comprising $189.2 million in unrestricted cash and $602.8 million in available borrowing capacity-providing ample flexibility to navigate near-term headwinds.

Valuation metrics further underscore FOR's deep-value appeal. The stock trades at a price-to-earnings ratio of 7.54, well below the S&P 500's average of 15.5, and offers a book value per share of $33.04, a 11% increase from the prior year. Analysts have taken notice: JPMorgan recently raised its price target to $25.00, while MarketBeat's consensus target of $32.00 implies a 29% upside from current levels. With a net debt-to-total capital ratio of 28.9% and a return on equity of 10.1%, FOR's balance sheet and profitability metrics suggest a compelling risk-reward profile.

Strategic Asset Positioning for the 2026 Rebound

Forestar's land portfolio is a critical differentiator. As of September 30, 2025, the company controlled 99,800 residential lots across 64 markets in 23 states, with 65,100 owned and 34,700 under contract. This geographic diversification mitigates regional demand risks and aligns with the K-shaped consumption dynamics highlighted by BofA, where higher-income groups drive spending in a post-recovery environment. The company's focus on entitled, short-duration projects-designed for phased development-ensures capital efficiency and rapid response to shifting market conditions.

Strategic partnerships also bolster FOR's positioning. Its Master Supply Agreement with D.R. Horton provides a reliable sales channel and reduces exposure to builder concentration risks. Additionally, Forestar's recent debt refinancing-issuing $500 million of 6.5% senior notes to retire 3.85% notes due in 2026-demonstrates proactive capital structure management, ensuring long-term flexibility as interest rates stabilize.

Conclusion: A Deep-Value Play on the Housing Cycle

Forestar Group's combination of undervalued real assets, disciplined capital allocation, and strategic positioning makes it a compelling investment ahead of the 2026 housing rebound. With a stock price trading at a significant discount to book value and a liquidity buffer to weather near-term volatility, FOR is well-positioned to capitalize on the sector's cyclical upturn. As policy-driven uncertainty recedes and demand for housing rebounds, the company's asset base-anchored by a geographically diversified portfolio and strategic partnerships-offers a clear path to outperformance. For investors seeking exposure to the housing sector's near-term inflection, Forestar represents a rare deep-value opportunity.