Sept. 2 (Bloomberg) -- Brazilian homebuilders tumbled, posting their longest losing streak in six months, after Rossi Residencial SA’s share sale heightened concern its larger rivals will follow suit after their stock prices doubled this year.

Rossi fell the most in the Bovespa index, sliding 5.4 percent to 10.86 reais in Sao Paulo trading. Cyrela Brazil Realty SA Empreendimentos e Participacoes, Brazil’s largest homebuilder, and Gafisa SA, the second-biggest, declined more than 4 percent. The BM&FBovespa Real Estate Index lost 4.3 percent, dropping for a fifth day, the longest stretch of declines since March.

Sao Paulo-based Rossi said last night it plans to sell an estimated 500 million reais to 600 million reais ($260 million to $313 million) of common shares. That followed PDG Realty SA Empreendimentos e Participacoes’s announcement yesterday that it planned to sell up to 800 million reais of new voting shares.

“The high demand for Brazilian homebuilders’ shares is boosting expectations that others in the sector, such as Cyrela and Gafisa, can also make offerings,” Eduardo Silveira, an analyst at Fator Corretora de Valores SA, said from Sao Paulo. “This leads to a short-term downward pressure due to shareholders’ dilution.”

Gafisa doesn’t comment on market rumors, a spokeswoman for the company’s outside press office said. Calls and e-mails to the outside press office of Cyrela weren’t returned.

Bank of America Corp. analysts Carlos Peyrelongue and Fanny Oreng stripped Gafisa of its“ buy” rating today, saying they expect the company and Cyrela to announce plans to sell stock over the next six months. Sao Paulo-based Gafisa in July called off plans to sell shares, citing “market conditions.”

‘Under Pressure’

“Despite attractive growth prospects for the sector this year and next, and in some cases, still attractive valuations even if one includes potential equity offers, we would expect homebuilders in Brazil to remain under pressure in the short- term,” the analysts wrote in a note to clients today.

Rossi’s stock sale suggests a dilution of Bank of America’s earnings estimates for 2010 and 2011 by 19 percent and 15 percent, respectively, they wrote.

Brazilian homebuilders have more than doubled their share prices this year, bolstered by falling interest rates, the nation’s economic recovery and the government’s stimulus plan for the housing industry.

Rally This Year

Rossi has jumped 187 percent in 2009, while Cyrela surged 128 percent and Gafisa rose 138 percent. The companies account for three of the four biggest gains in the Bovespa, which has added 48 percent in 2009. Rossi trades at 24 times reported earnings, compared with 12.9 times at the start of the year.

Cyrela dropped 4.9 percent to 21.01 reais today, while Gafisa fell 5.3 percent to 24.95 reais. PDG slid 4.3 percent to 24.40 reais.

Agra Empreendimentos Imobiliarios SA fell the most in the 12-stock BM&FBovespa Real Estate Index, losing 11 percent to 4.50 reais. The homebuilder will merge with Abyara Planejamento Imobiliario SA and Klabin Segall SA in an all-share transaction, according to a regulatory filing sent to Brazil’s securities regulators by the companies.

To contact the reporter on this story: Fabiola Moura in New York at fdemoura@bloomberg.net

Last Updated: September 2, 2009 17:41 EDT