One of the biggest US homebuilders just sounded the alarm on a slowdown — here are the housing stocks traders are betting can sink further

Diego Perez works on a Toll Brothers home this year in Florida.

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Diego Perez works on a Toll Brothers home this year in Florida.
source
Joe Raedle/Getty Images

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.


PulteGroup

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Markets Insider

Ticker: PHM

Short interest: $747 million

Short interest change in 2018: +$136.2 million

Year-to-date performance: -23%

Source: S3 Partners


Lennar

source
Markets Insider

Ticker: LEN

Short interest: $717 million

Short interest change in 2018: +$368.9 million

Year-to-date performance: -37%

Source: S3 Partners


DR Horton

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D.R. Horton stock price in 2018.
source
Markets Insider

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

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TRI Pointe Homes stock price in 2018.
source
Markets Insider

Ticker: TPH

Short interest: $277 million

Short interest change in 2018: +$103.2 million

Year-to-date performance: -34%

Source: S3 Partners


Toll Brothers

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Toll Brothers stock price in 2018.
source
Markets Insider

Ticker: TOL

Short interest: $235 million

Short interest change in 2018: +$107.1 million

Year-to-date performance: -32%

Source: S3 Partners


LGI Homes

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LGI Homes stock price in 2018.
source
https://markets.businessinsider.com/stocks/lgih-stock

Ticker: LGIH

Short interest: $190 million

Short interest change in 2018: +$127.4 million

Year-to-date performance: -46%

Source: S3 Partners


NVR

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NVR stock price in 2018.
source
Markets Insider

Ticker: NVR

Short interest: $143 million

Short interest change in 2018: +$85.9 million

Year-to-date performance: -28%

Source: S3 Partners


KB Home

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KB Home stock price in 2018.
source
Markets Insider

Ticker: KBH

Short interest: $94 million

Short interest change in 2018: +$82.3 million

Year-to-date performance: -38%

Source: S3 Partners


TopBuild

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TopBuild stock price in 2018.
source
https://markets.businessinsider.com/stocks/bld-stock

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

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Installed Building Products stock price in 2018.
source
https://markets.businessinsider.com/stocks/ibp-stock

Ticker: IBP

Short interest: $77 million

Short interest change in 2018: +$8.2 million

Year-to-date performance: -54%

Source: S3 Partners