The shares of home building companies in the US suffered their worst one-day drop in more than three years amid concerns of a slowdown in the white-hot US housing market that could weigh on US economic growth.

Two indices of homebuilders’ stocks fell by more than 7 per cent, a drop last seen in August 2002 after Toll Brothers, a builder of luxury homes, warned investor of slower sales next year. Shares in Toll Brothers ended Tuesday’s session 14 per cent lower at $33.91.

Economists have widely credited the US housing market for keeping the world’s largest economy out of recession in recent years by making US homeowners feel wealthy and thus free to spend more than they earn.

Stephen Roach, chief economist at Morgan Stanley, said: “The American consumer has been spending beyond his or her means for five years because of the housing bubble.

He noted that about 70 per cent of the US gross domestic product is accounted for by consumer spending and said a slowdown in the housing market could shave at least half a percentage point of growth in gross domestic product.

Sheryl King, economist at Merryll Lynch, said the housing market did not need to decline, but merely flatten for the economy to feel the effects.

“If house prices [stop growing}, that can shave 1 percentage point of consumer spending,” she said. “All things being equal, we add enormous heating bills and gasoline bills and rising interest rates, and it’s looking all the worse…you could be looking at a whole percentage point less in GDP growth.“

Toll Brothers on Tuesday cited rising inventories of unsold homes as a reason for slowing sales. Robert Toll, chairman and chief executive, said: “It appears we may be entering a period of more moderate home price increases.”

Homebuilders have enjoyed very strong growth in the last five years and have developed a cult following in the stock market as a result. The Dow Jones US Homebuilders Index and the S&P 500 homebuilders index have risen about 300 per cent in the last five years, against the backdrop of a broader US market that has lost 13 per cent of its value.

Ivy Zelman, who covers housing companies for Credit Suisse First Boston, said she does not yet see the signs of a nationwide slowdown in the market. However, some regional markets are showing a slowdown.

“For-sale signs in Northern Virginia have grown by 70 per cent, and Toll has exposure there,” Ms Zelman said. She maintains a cautious view of the sector because she thinks recent demand has been fuelled by speculators buying home only to re-sell them at a profit a few months later. Such speculators have used non-conventional mortgages that could become pricier in the current interest rate environment, and that could further weigh on housing prices and demand for homes, she said.

However, Gregg Schoenleber, analyst at Deutsche Bank, said Toll Brothers was not representative of the sector because it was a luxury homebuilder focused on the US mid-Atlantic states. Other rivals have reported strong sales, he said.

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