(Reuters) – U.S. luxury home builder Toll Brothers Inc (TOL.N) on Tuesday reported its first fall in quarterly orders in more than four years as rising mortgage rates and higher home prices hit demand, sending its shares down as much as 10 percent.

Toll’s results are the latest evidence of slowing housing demand after years of steady recovery following the housing crash of 2007-2008.

The housing market has been a weak spot in a robust U.S. economy, with economists blaming the sluggish trend on rising mortgage rates, which have combined with higher prices to make home purchase less affordable for potential buyers.

Sales of new U.S. single-family homes plunged to a more than 2-1/2-year low in October, with sharp declines across regions.

Toll, whose homes can cost upwards of $2 million, said orders, a key indicator of future revenue, dropped 13.3 percent to 1,715 units in the quarter ended Oct. 31, against the 6.5 percent rise expected by analysts.

Those numbers also weighed on shares of other homebuilders, with D.R. Horton Inc (DHI.N), Lennar Corp (LEN.N) and PulteGroup Inc (PHM.N) all down 3-6 percent.

Orders fell the most in California, Toll’s biggest market by revenue, declining 39.4 percent to 226 units in the quarter, the company said.

“Significant price appreciation over the past few years, fewer foreign buyers in certain communities, and the impact of rising interest rates, all contributed to this slowdown,” Chief Executive Officer Douglas Yearley said, referring to the California market.

Pennsylvania-based Toll’s gross margins fell to 21.4 percent in the quarter from 22.3 percent a year earlier, coming in below analysts’ expectations of 22.4 percent.

“We continue to find Toll in a particularly difficult position given its high California exposure, with unsustainably high gross margins in the state,” Barclays analyst Matthew Bouley wrote in a note.

Analysts also said Toll’s margins may have been hurt by higher marketing incentives offered by the company to lure buyers.

Last month, No.1 U.S. homebuilder D.R. Horton (DHI.N) also said it was seeing a rise in incentives in the face of choppy demand as it forecast first-quarter home sales below analysts’ estimates.

Toll forecast first-quarter homes sales in fiscal 2019 between 1,350 and 1,550 units, below the 1,554 units expected by analysts on average, according to IBES data from Refinitiv.

The company did not provide a forecast for the full year, citing uncertain demand.

Net income rose 62 percent to $311 million, or $2.08 per share, in the quarter, beating analysts’ estimate of $1.83 per share.

Revenue surged 21.1 percent to $2.46 billion, also above the estimate of $2.35 billion.

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