What happened 

Shares of KB Home (KBH 2.62%) fell as much as 19.1% in early trading after the homebuilder gave investors weaker-than-expected guidance and reported disappointing bookings. The stock was still down 18% at 11:10 a.m. EST. 

So what

Management now expects $1.31 billion to $1.34 billion in revenue in the fourth quarter, falling well below the analyst forecast of $1.44 billion. They also said that through 10 weeks of the fourth quarter, bookings were down 14% versus a year ago, indicating an imminent revenue slowdown. 

Homes under construction.

Image source: Getty Images.

First-quarter 2019 guidance was down to $800 million to $860 million with operating income margin of just 3.6% to 4.6%. Revenue, in particular, fell well short of the $897 million that analysts were expecting and is another sign that a housing slowdown may be coming. 

Now what

It's been a great decade for homebuilders, but rising interest rates could take a bite out of business over the next few years. It looks as if that's what we're seeing right now in KB Home's guidance and why shares are selling off. Keep an eye on earnings over the next few quarters to see if the trend continues or reverses because that will drive the stock, and potentially the entire economy, over the long term.