Housing stocks fare worse than overall stock market

UPDATE: Most housing stocks, along with the overall market, rebounded after Tuesday's opening bell. As of 10 a.m., the Dow had rebounded about 2%. Homebuilding stocks have been in constant flux in the time since trade started, flirting with both negative and positive changes. All of the Top 10 builders, however, have remained below the overall percentage increase of the Dow so far Tuesday.

Dive Brief:

Housing stocks Monday fell further than the overall 3.5-4% dip in the Dow after a volatile day for the stock market.
The Dow fell more than 1,000 points in early trading Monday. It then rebounded during lunch time, but slid again and ended the day down more than 580 points, which is close to the worst single-day loss since August 2011.
Of the Top 10 builders on Builder magazine's Builder 100 list, KB Home saw the steepest decline, around 6.8%, followed by Lennar, down 6.3%, and PulteGroup, around 6.25%.

Dive Insight:

Market observers said Monday's selloff was likely driven by fears involving China's faltering economy and concerns of an impending Fed interest rate hike.

The major homebuilder losses are even more painful considering the rally builder stocks experienced in the market last week. Homebuilders' “bearish-to-bullish reversal” came at a time when Wall Street’s usual “bulls” — biotechnology and media stocks — were struggling, a Bloomberg report noted.

Despite the wild day in Wall Street, The New York Times cautions that panic may be an overreaction. "Many analysts have said that a correction to stock market valuations was overdue after a long bull market," The Times said. "And it is too early to say how the financial market slump will affect the underlying global economy where goods and services are actually produced and consumed."

Aside from builder performance in the market, construction professionals should keep an eye on the market volatility as an indicator for the Fed's interest rate decision. Although many expect the agency to implement the long-expected hike in September, an uncertain economy could delay that major decision. And the longer the Fed puts off the bump in interest rates, the better the climate for homebuyers looking to lock in low rates.