Meritage Homes Pushed to the Brink by Bad Housing News (MHO, KBH, MTH)

Given the bad news regarding new-home sales unveiled  this morning, it's no real surprise that homebuilder stocks like KB Home (NYSE:KBH) and M/I Homes Inc. (NYSE:MHO) are struggling. KBH is down 2.8% as of the last look, while MHO shares are off 4.1%. None of the major homebuilder names are underwater as much as Meritage Homes Corp. (NYSE:MTH) is today, though, with its 8.6% drubbing. Already struggling, today's stumble from MTH may well jump-start a more serious selloff that the bulls have thus far been able to stave off.

First things first. The reason M/I Homes, Meritage Homes, and KB Home shares are getting hit so hard on Wednesday is largely because the Census Bureau reported this morning that new homes only sold at an annualized pace of 384,000 in March. That's the lowest reading seen since last July's reading of 373,000; the vast majority of the readings since then have been well above the 400 mark.

Truth be told, however, the last few months' worth of ALL the real estate and housing data had already left the likes of MTH, KBH, and MHO vulnerable to pullbacks. As the chart below shows, existing home sales have been falling since mid-2013, starts and permits have been slowing, as have home prices. While it's hyperbole to say the housing market is imploding, it wouldn't be out of line to say the very best days of the housing recovery are behind it.

So what is it that makes shares of Meritage Homes Corp. a riskier bet than M/I Homes or KB Home here? It's largely a technical one... MTH has been trending lower for a while, as evidenced by the fact that (1) the 200-day moving average line (green) is now pointed lower, and Meritage Homes shares are on the underside of that long-term line, and (2) with today's low of $38.70, MTH is knocking on the door of moving below a huge support level at $38.30 that was formed in August of last year.

To be clear, Meritage Homes Corp. really needs to close under that floor to really get past the point of no return. The bears have momentum on their side though, and one more stumble could do it here in the shadow of a waning housing market.

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