(Bloomberg) -- Homebuilder stocks are tumbling Tuesday after industry bellwether D.R. Horton Inc. delivered a 2025 revenue forecast that failed to meet Wall Street’s expectations.

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The S&P Homebuilding Index plunged as much as 7.8% on Tuesday in the biggest intraday drop in more than two years. The rout came as investors grew concerned about homebuilding companies’ continued use of financing incentives that put a near-term drag on gross margins and still elevated interest rates that discourage homebuyers.

“While the large, public homebuilders are still among the best positioned to navigate a challenging operating environment, they’re not immune to the impact of higher rates and weakening consumer confidence,” Bloomberg Intelligence analyst Drew Reading said.

Incentives still remain a key part of homebuilder strategies, with D.R. Horton reporting that 80% of mortgage buyers took advantage of rate buydowns in the prior quarter, suggesting that buyers were not willing to take the leap on a new property without additional support. Shares of key competitors Lennar Corp., NVR Inc., PulteGroup Inc. and Toll Brothers Inc. are slumping in sympathy.

As investors look for ways to play the expected decline in rates, homebuilder stocks have been a consensus long. As such, D.R. Horton’s results will be sure to “inflict pain,” Vital Knowledge founder and analyst Adam Crisafulli wrote in a note to clients Tuesday.

While the Federal Reserve’s first rate cut in four years offered a sign of relief for the broader market, sentiment for builders has soured in recent weeks amid renewed concern about consumers ability to handle mortgage rates that are pushing back toward 7%. The S&P 500 Index has gained 3.5% since the Fed’s September meeting, compared with a 11% drop in homebuilders.

Homebuilding stocks capitalized on the July rally sparked by a strong inflation print, so it’s not surprising the group could be giving back some of those gains now, Oppenheimer analyst Tyler Batory said. To him, both seasonal and psychological factors are likely behind slowing homebuyer activity. Spring selling season is the usually most optimal time for builders. And uncertainty over the interest-rate environment and the US Presidential election are giving homebuyers a pause.