NEW YORK (Reuters) - U.S. housing stocks, which have been a bright spot in this year's market, were among the hardest hit in Monday's selloff.
Amid concerns that the equity rout could hit the broader economy, the PHLX housing index <.hgx> underperformed the benchmark S&P 500 index. The housing index slid 5.1 percent in its biggest one-day percentage loss since June 2013, while the Standard & Poor's 500 <.spx> fell 3.9 percent.
KB Home
sank 6.8 percent to $14.01, while Lennar fell 6.3 percent to $50.08 and PulteGroup dropped 6.3 percent to $19.62, leading losses among home builders.The declines followed a strong run for housing stocks. Last week, data including a report showing U.S. housing starts rose to a near eight-year high in July lifted the housing index to its highest level in eight and a half years.The sector has benefited from low interest rates, increased consumer confidence and more sustainable growth in the labor market. "When you get this sharp of a (market) decline, people start to worry about downpayments and a reassessments of wealth," said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey.The outlook for the U.S. economy still remains the biggest factor for the housing sector, strategists said."Is this environment going to in some way hurt the underlying (U.S.) economy?" said Jonathan Golub, chief market strategist at RBC Capital Markets in New York. "At this point the answer is no, but that's what we're watching for. If it does, obviously housing is very sensitive to that."Even with Monday's price drop, the housing index was up 5.6 percent for the year so far, while the S&P 500 was down 7.9 percent."The one thing that we're still taking a lot of comfort from is U.S. economic data has been quite good, especially related to housing," said Thomas Lee, managing partner at Fundstrat Global Advisors in New York. "Having exposure to U.S. housing has been a good strategy this year."Even with the run-up in prices, valuations in the sector are below the S&P 500's level. The price-to-earnings ratio for the three home builders in the S&P 500 - Lennar, D.R. Horton and PulteGroup - is at 14.8 compared with 16.0 for the entire S&P 500, Thomson Reuters data showed.Among home improvement companies, Home Depot was down 3.1 percent at $112.54 on Monday while Lowes Cos was down 3.9 percent at $68.31. (Reporting by Caroline Valetkevitch; Editing by Meredith Mazzilli and Leslie Adler)
