The recent carnage in the housing stocks gives us another chance to witness the manic depression of the markets in full force. When times are good, analysts climb over each other to raise their estimates and target prices, and most will maintain their optimism even when cracks start appearing in the foundations of their theses.

Whether that's to avoid the anger of the companies, the anger of big institutional clients who hold the shares, or just stubbornness, it doesn't really matter. But once a few break from the herd, you often see a race to the bottom as analysts try to find a bar low enough for the companies to surpass.

Such would seem to be the case today with housing stocks like KB Homes (NYSE:KBH). For while the country's fifth-largest homebuilder posted decent financial results on a year-over-year basis, order trends are markedly softening and management cut its own earnings guidance by more than 10%.

In the quarter that was, revenue was up 22% on a 6% increase in units sold. Because of softening in the gross margin of construction activity, though, operating income growth lagged sales at 16%. More worrisome was that gross new orders were down 5% and net new orders were down 19% from a year ago -- folks just aren't scrambling to buy new houses like they were.

And there could, perhaps, be another leg of problems in the year to come. Unsold inventories are at a pretty high level, and affordability is a real issue in some areas. (Ignore that gibberish about historically low mortgage rates -- it doesn't matter if you still can't afford the house.)

What concerns me, though, is whether or not builders will have to start writing down the value of communities and land holdings on their books. That shouldn't be a huge problem for KB Homes, which has an average inventory of land, but it's something to keep in mind for others like Toll Brothers (NYSE:TOL), Pulte (NYSE:PHM), Lennar (NYSE:LEN), and Centex (NYSE:CTX ). Likewise, keep an eye on debt -- again, KB Homes isn't the worst here, but it's something to consider. After all, there's nothing worse than holding a lot of debt used to buy/build products that you just can't move.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).