(Bloomberg) -- Homebuilder stocks tumbled, extending their selloff this month, after Jerome Powell alluded the Federal Reserve was set to raise interest rates in March and didn’t rule out the possibility of a hike at every meeting after.

Toll Brothers Inc. and D.R. Horton Inc. were among the builders that plummeted after Powell spoke at a virtual conference after the Federal Open Market Committee concluded its two-day meeting, noting that decisions have not been made on the official rate-hike path and that monetary policy needs to be “nimble.” 

The S&P Supercomposite Homebuilding Index sank 3.9% to its lowest level since Oct. 13, bringing its selloff this month to about 18% with investors increasingly focused on the impact of rising rates after the group gained 49% in 2021. 

“In all likelihood, stocks will stay pressured near term,” said Wells Fargo analyst Deepa Raghavan, who covers homebuilding stocks. A steeper pace of rate increases, such as 100 basis points or more in a year, is “optically considered a risk to affordability and has potential to slow down housing market.”

Homebuilder stocks had been surging since mid-2020, as the pandemic pushed many people to work from home amid nationwide lockdowns. That spurred home-buying demand, with bidding wars breaking out across the country as would-be homebuyers fought to get a piece of the nation’s slender housing supply. Meanwhile, builders faced clogged supply chains that lengthened construction times, further raising prices. 

Now, a rise in borrowing costs has the potential to deter homebuyers, who are also facing lofty housing prices. LGI Homes Inc. and Installed Building Products Inc. were among the sharpest decliners, with both closing down by more than 5% each on Wednesday after Powell’s comments. M.D.C. Holdings, Inc. and KB Home also fell sharply.

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