Why Boral Limited (ASX:BLD) and James Hardie Industries plc (ASX:JHX) shares are crashing today

The crash in the US homebuilder index is weighing heavily on the Boral Limited (ASX: BLD) share price with the stock slumping to a two-year low.

The BLD share price lost 3.8% to $5.10 during lunchtime trade and the James Hardie Industries plc (ASX: JHX) share price isn’t too far behind with a 2.8% dive to $15.60 while the S&P/ASX 200 (Index:^AXJO) (ASX: XJO) index shed 0.8% of its value.

These stocks are being hammered on news that confidence among US homebuilders have fallen off a cliff and have hit its lowest level since 2014, according to data from the latest National Association of Home Builders/Wells Fargo Housing Market Index.

Risk of a US housing slowdown

The Index, which also measures other factors like sales, slumped eight points in November to 60. This is its lowest level since August 2016 and the result is far worse than the one point drop that economists were expecting.

You can blame rising US interest rates and political uncertainty from the mid-term elections. There are fears that housing is becoming the Achilles heel of US economic growth!

The shocking slowdown in US housing is likely to weigh on interest rate deliberations by the US Federal Reserve at its next meeting and may soften the central bank’s plan to lift rates several times in 2019.

Time to bail?

It’s not only Boral and James Hardie that is being hit hard. The Reece Ltd (ASX: REH) and the Reliance Worldwide Corporation Ltd (ASX: RWC) share prices are also being punished for their large exposure to the US housing market.

The big question facing investors now is whether the share price crash represents a buying or short-selling opportunity.

Economists believe the weakness in US housing is temporary and won’t derail economic growth. The US mid-term is over and the market will get used to the higher interest rate environment.

The upbeat employment and wages growth outlook should put a floor on homebuilding activity, although we may need to wait till early next year to see any real rebound in the housing market.

I too hold this view and believe that US housing is far better placed than the Australian market.

A profit warning by Fletcher Building Limited (ASX: FBU) underscores this point with the building materials company blaming the challenging domestic market for the bad news.

The FBU share price suffered a 9.4% tumble to $4.70 and is the worst performer on the S&P/ASX 200 index.

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Motley Fool contributor Brendon Lau owns shares of Boral Limited and Reliance Worldwide Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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