M.D.C. Holdings stock sinks after BofA turns bearish, citing valuation and affordability concerns

Shares of M.D.C. Holdings Inc. sank 5.9% in morning trading Friday, after BofA Securities analyst John Lovallo turned bearish on the homebuilder, citing concerns over valuation and near-term housing affordability. He cut his rating to underperform from neutral, while keeping his price target at $63. "We view M.D.C. as a well-run, well-positioned homebuilder but believe the year-to-date run in the stock fully encompasses these positive, particularly considering the affordability challenges we expect in the months ahead," Lovallo wrote in a note to clients. The stock has rallied 26.4% year to date, and closed at a 16-year high on Wednesday. Lovallo said affordability could be hurt by rising raw materials prices and interest rates, and as coming stimulus measures support further gains in home prices. M.D.C.'s stock selloff comes as the iShares U.S. Home Construction ETF shed 2.3%, while the S&P 500 fell 0.5%. Among M.D.C.'s more active peers, shares of D.R. Horton Inc. slid 4.4%, Lennar Corp. lost 4.0%, PulteGroup Inc. declined 3.2% and Toll Brothers Inc. gave up 3.7%.

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