After a banner 2017, housing stocks pace for worst year since the financial crisis

Housing stocks, among the top performers of 2017, are biting the dust.

Homebuilders as a group, measured by the U.S. home construction ETF ITB, has sunk over 12 percent this year; that places the group on pace for its worst year since 2008, when it lost 44 percent, and its first negative year since 2011.

Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management, says challenges may continue for the housing space. Here are his reasons why.

• The existing home sales report, due out before Thursday's opening bell, could have an impact on equities and the dollar. Housing demand appears to have peaked because construction starts for new single homes have been flat for months.

• This downside comes even as homebuilder confidence is near all-time highs.

• The recent rise in interest rates has pushed mortgage rates to a seven-year high, and affordability is clearly becoming an in issue. Although shares of Lowe's soared 10 percent on Wednesday following the company's quarterly earnings, it missed Wall Street's forecasts for quarterly same-store sales. This could signal the market is slowing down.

• Housing and all of its related services contribute nearly 18 percent of total U.S. gross domestic product, so any slowdown in the sector could reverberate through the whole equity market, especially homebuilders.

Bottom line: Home construction stocks are tumbling this year, and upcoming data could have a bearing on the group and the broader market.

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