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One of the biggest US homebuilders just sounded the alarm on a slowdown — here are the housing stocks traders are betting can sink further (PHM, LEN, DHI, TPH, TOL, LGIH, NVR, KBH, BLD, IBP)

Toll Brothers home

  • Homebuilders were under pressure this week after Toll Brothers warned of a housing-market slowdown in its quarterly earnings report.
  • Peers like KB Home, PulteGroup and Lennar fell in sympathy.
  • Traders are building larger short positions in many of these names, according to analysis by S3 Partners.

Homebuilder stocks were under pressure this week after Toll Brothers issued a warning about a slowdown in the housing market, and an analysis of short interest in the sector suggests there is more pain ahead.

"There has been a recent upswing in short selling in the Homebuilding Sector after short interest in the sector fell by almost a third to $2.96 billion at the end of October," Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, a financial technology and analytics firm, wrote in a note on Tuesday.

Rising interest rates have weighed heavily on the group this year, as a jump in borrowing costs traditionally deters first-time home buyers. The Federal Reserve has announced three interest rate hikes so far this year, and eight hikes since late 2015, when the central bank set out to normalize monetary policy following the global financial crisis. As rates have jumped, the XHB, an exchange-traded fund tracking the S&P 500 homebuilders sector, has plunged 21% over the past year.

At the same time, new home sales are declining. The Commerce Department reported last week that new home sales in the US fell 8.9% in October to the lowest level since March of 2016.

Here are the most heavily shorted stocks in the homebuilders sector, according to S3 Partners data. 

Now read: The CEO of one of America's biggest homebuilders sounds the alarm on a 'housing slowdown' (TOL)

Now read: US construction spending down 0.1% in October

PulteGroup

Ticker: PHM

Short interest: $747 million

Short interest change in 2018: +$136.2 million

Year-to-date performance: -23%

 

Source: S3 Partners



Lennar

Ticker: LEN

Short interest:  $717 million

Short interest change in 2018: +$368.9 million

Year-to-date performance: -37%

 

Source: S3 Partners



DR Horton

Ticker: DHI

Short interest: $347 million

Short interest change in 2018: +$144.3 million 

Year-to-date performance: -29%

 

Source: S3 Partners



See the rest of the story at Business Insider

Full "The Business Insider: The Money Game" article




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