• Homebuilders were under pressure this week after
  • Peers like
  • 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 in its quarterly earnings report about a slowdown in the housing market, and an analysis of short interest in the sector suggests more pain is 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, the 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 homebuyers. The Federal Reserve has announced three interest-rate hikes this year and eight hikes since late 2015, when the central bank set out to normalize monetary policy after 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 their lowest level since March 2016.

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

PulteGroup

PulteGroup

Ticker: PHM

Short interest: $747 million

Short interest change in 2018: +$136.2 million

Year-to-date performance: -23%

Source: S3 Partners

Lennar

Lennar

Ticker: LEN

Short interest: $717 million

Short interest change in 2018: +$368.9 million

Year-to-date performance: -37%

Source: S3 Partners

D.R. Horton

D.R. Horton stock price in 2018.

Ticker: DHI

Short interest: $347 million

Short interest change in 2018: +$144.3 million

Year-to-date performance: -29%

Source: S3 Partners

Tri Pointe Homes

TRI Pointe Homes stock price in 2018.

Ticker: TPH

Short interest: $277 million

Short interest change in 2018: +$103.2 million

Year-to-date performance: -34%

Source: S3 Partners

Toll Brothers

Toll Brothers stock price in 2018.

Ticker: TOL

Short interest: $235 million

Short interest change in 2018: +$107.1 million

Year-to-date performance: -32%

Source: S3 Partners

LGI Homes

LGI Homes stock price in 2018.

Ticker: LGIH

Short interest: $190 million

Short interest change in 2018: +$127.4 million

Year-to-date performance: -46%

Source: S3 Partners

NVR

NVR stock price in 2018.

Ticker: NVR

Short interest: $143 million

Short interest change in 2018: +$85.9 million

Year-to-date performance: -28%

Source: S3 Partners

KB Home

KB Home stock price in 2018.

Ticker: KBH

Short interest: $94 million

Short interest change in 2018: +$82.3 million

Year-to-date performance: -38%

Source: S3 Partners

TopBuild

TopBuild stock price in 2018.

Ticker: BLD

Short interest: $83 million

Short interest change in 2018: +$33.3 million

Year-to-date performance: -37%

Source: S3 Partners

Installed Building Products

Installed Building Products stock price in 2018.

Ticker: IBP

Short interest: $77 million

Short interest change in 2018: +$8.2 million

Year-to-date performance: -54%

Source: S3 Partners