Rising costs for lumber and other building materials and difficulty in securing buildable lots pinched homebuilders' mood for a third straight month.
Large publicly traded builders, including PulteGroup (PHM), D.R. Horton (DHI) and Lennar (LEN), fell despite having relatively healthy land holdings, relative to the plethora of small independent builders whose views are most closely reflected by the National Association of Home Builders' survey.
The NAHB/Wells Fargo Housing Market Index slid 2 points in April to a six-month low of 42, defying forecasts for a modest gain. Readings below 50 signal pessimism.
"Many builders are expressing frustration over being unable to respond to the rising demand for new homes due to difficulties in obtaining construction credit, overly restrictive mortgage lending rules and construction costs that are increasing at a faster pace than appraised values," NAHB Chairman Rick Judson, said in a statement. "While sales conditions are generally improving, these challenges are holding back new building and job creation.
Pulte lost 7% on the stock market Monday as the major averages tumbled on weak Chinese and U.S. economic data and crashing gold prices. D.R. Horton fell 6% and Lennar 7%.
But larger builders have dismissed the souring sentiment as a reflection of smaller rivals' travails. They have deeper pockets and easier access to credit. They've also banked some land at cheaper prices during the downturn and are now reporting their healthiest orders in years.
Taylor Morrison Home (TMHC) surged 10% last week after its IPO, noting a strong land position. But it fell 3% Monday.
Lumber supplier and homebuilder Weyerhaeuser (WY) has also said it's fired up about a housing recovery.
Builders are more upbeat about the future: NAHB's six-month outlook gauge rose 3 points to 53, the best in nearly seven years.
Sherwin-Williams (SHW) got an upgrade from Nomura, which saw plenty of room for market share gain and said the vertical model lets the paint seller control retail gross margins better than a traditional home improvement store like Home Depot (HD).
"Unlike most housing plays, we believe SHW offers growth, not just recovery," Nomura analyst Aram Rubinson wrote in a client note. "New store growth can last 10 years and global expansion remains nascent."