Shares in local homebuilders continued to fall Monday after an industry analyst cut his estimates for builders nationwide, saying the industry needs to consolidate. Shares of KB Home were downgraded.

Wachovia analyst Carl Reichardt said Friday afternoon that “poor large homebuilder results aren’t just caused by poor housing fundamentals” but are instead “compounded by a hyper-competitive industry structure.”

Reichardt suggested that there needs to be consolidation in the industry before there can be any meaningful recovery. He said he expects homebuilders to continue posting losses well into 2008.

Shares in Calabasas-based homebuilder Ryland Corp. shed 3.6 percent Friday and lost an additional 3.9 percent Monday.

Shares in Los Angeles-based KB Home closed down more than 2 percent Friday and lost an additional 4.3 percent Monday after the homebuilder was downgraded to a “nuetral” from a “buy” by UBS analyst David Goldberg. Goldberg cited “weakness in the broader housing market,” for the downgrade.