Persimmon, the UK's largest housebuilder by volume, led the fallers on the FTSE 100, with shares dropping 3.4 per cent to 2,772.5p, while Barratt, Taylor Wimpey and Berkeley Group were all among the biggest fallers.
FTSE 250-listed builders were equally badly hit, with Crest Nicholson, Redow, Bovis and Countryside all falling into the red.
|FTSE 100||FTSE 250|
Analysts suggested investors were spooked after a third quarter trading update from Persimmon this morning, which suggested forward sales were strong, but added its site numbers had fallen 10 per cent this year.
Shares in housebuilders have leaped this year, with Persimmon alone rising around 70 per cent. But despite the government's pledge to inject more cash into the sector-boosting Help to Buy scheme, the tide may be turning.
Shore Capital's Robin Hardy reiterating his sell rating on Persimmon.
We continue to see stiffening headwinds for the house builders from a softening market climate with a much weaker pricing outlook, rising costs and a loss of confidence in pricing by both buyers and estate agents.
He added: "Persimmon is a very strong business but the rating is just too stretched with the shares trading on a [price to earnings ratio] of almost 11.5x next year and now yielding 4.7 per cent (good for the market but low relative to other house builders)."
Meanwhile, analysts at Peel Hunt said they were "twitchy".
"The key worry is that the total sales outlets have dropped 10 per cent over the autumn period due to the strong sales rates and also problems in gaining reserved matters for planning," they said.
It's likely those worries over planning regulations slowing building scared investors, pushing down the whole sector - but Anthony Codling at Jefferies said those concerns were overblown.
"Sentiment is turning against the housebuilders at the moment, but I remain bullish," he said.
"We are not building enough homes and [housebuilders] are the answer.
Ten per cent fewer sites is irrelevant really - Persimmon is going to make numbers, it's sold what it needs to sell for this year.
"It talked in the statement about a normal seasonal selling pattern, which suggests the market is operating as normal and everyone is not holding their breath on Article 50," he added.
"I genuinely just think this is posturing ahead of [this month's] Budget."