* FTSE 100 down 1 pct in late-session
* Housebuilders hit by bearish reports on sector outlook
* Some traders cite concern over FTSE valuations
By Sudip Kar-Gupta
LONDON, April 7 (Reuters) - Britain’s top share index fell on Monday, retreating from a three-week high as a drop in housebuilders and concerns over the valuation of some stocks weighed on the market.
The blue-chip FTSE 100 index, which rose 0.7 percent on Friday to reach its highest in around three weeks, declined by 1 percent, or 65.76 points, to 6,629.79 points in late session trading.
Housebuilding and property stocks - which have been among the best performers over the last year - slumped, with traders citing renewed concerns about the risk that the country’s housing market may be overheating.
The FTSE 350 Construction and Building Materials Index rose 23 percent last year and is up by around 13 percent since the start of 2014.
However, traders said reports by consumer group the HomeOwners Alliance on Monday and the Sunday Times newspaper that the rise in property prices risked forming a bubble and making homes unaffordable, were weighing on the sector.
“The property and housebuilding stocks are taking a hit on the back of these negative comments about the outlook for the sector,” said Central Markets trading analyst Joe Neighbour.
Housebuilder Barratt Developments fell 4.7 percent, making it the worst-performing FTSE 100 stock in percentage terms, while rival Persimmon also slipped 3.1 percent.
Concern that corporate earnings were not strong enough to justify the ratings of companies on the FTSE 100 also weighed on stocks. The FTSE 100 is trading on a 12-month forward price/earnings ratio of 13.2 times, compared with a five-year average of 11 times, according to Thomson Reuters Datastream.
“There are question marks about valuations,” said Brown Shipley fund manager John Smith. “This year, stocks have to deliver earnings growth to justify the rating.”
The FTSE 100 rose 14.4 percent in 2013 to post its best annual gain since 2009, and the index reached a peak of 6,867 points in January this year, its best level since early 2000.
It has since slipped back, due to a slump in emerging markets and tensions between Russia and Western powers over Ukraine, and Smith expected the market to remain trapped in that range in the near-term.
“There is not enough belief at this point in time to push the market higher,” he said. (Additional reporting by Tricia Wright; Editing by Toby Chopra)