Ryland Reports Results for the Third Quarter of 2008

-- Cash from operations totaled $101.0 million for the quarter ended September 30, 2008;

-- Cash balance of $344.8 million as of September 30, 2008;

-- Net debt-to-total capital ratio was 35.9 percent at September 30, 2008;

-- Pretax charges for inventory valuation adjustments were $60.4 million, while option deposits and feasibility write-offs were $4.3 million;

-- Loss of $1.54 per share for the quarter ended September 30, 2008, included inventory valuation adjustments, write-offs and a $16.5 million, or $0.39 per share, noncash income tax charge, compared to a loss of $1.30 per share for the same period in 2007;

-- Consolidated revenues of $543.8 million for the quarter ended September 30, 2008, reflected a decrease of 26.2 percent from the quarter ended September 30, 2007;

-- Housing gross profit margins averaged 11.8 percent prior to inventory valuation adjustments and write-offs for the quarter ended September 30, 2008, compared to 17.4 percent for the same period in 2007. Including the inventory valuation adjustments, housing gross profit margins averaged 0.8 percent for the third quarter of 2008, compared to negative 0.3 percent for the same period in 2007;

-- Selling, general and administrative expenses, as a percentage of homebuilding revenue, were 11.6 percent for the third quarter of 2008, compared to 13.8 percent for the second quarter of 2008 and 12.3 percent for the third quarter of 2007;

-- Closings totaled 2,017 units for the quarter ended September 30, 2008, reflecting a 19.2 percent decrease from the same period in the prior year;

-- New orders in the third quarter of 2008 declined 31.6 percent to 1,284 units from 1,876 units in the third quarter of 2007;

-- Inventory of houses started and unsold decreased by 12.6 percent to 719 units at September 30, 2008, from 823 units at December 31, 2007.

RESULTS FOR THE THIRD QUARTER OF 2008

For the third quarter ended September 30, 2008, the Company reported a consolidated net loss of $65.7 million, or $1.54 per diluted share, compared to a loss of $54.7 million, or $1.30 per diluted share, for the same period in 2007. The Company had inventory valuation adjustments and option deposit and feasibility write-offs totaling $64.7 million, as well as a noncash income tax charge of $16.5 million, during the third quarter ended September 30, 2008.

The homebuilding segments reported a pretax loss of $72.4 million during the third quarter of 2008, compared to a pretax loss of $90.0 million for the same period in 2007. The reduction in loss was primarily due to lower inventory valuation adjustments and write-offs, partially offset by a decline in closings and margins.

Homebuilding revenues decreased 26.7 percent to $526.2 million for the third quarter of 2008, compared to $717.5 million for the same period in 2007. This decline was primarily attributable to closings totaling 2,017 units for the third quarter ended September 30, 2008, reflecting a 19.2 percent decrease from closings totaling 2,495 units for the same period in the prior year, and to a 10.6 percent decline in the average closing price of a home, which dropped to $254,000 for the quarter ended September 30, 2008, from $284,000 for the same period in 2007. Homebuilding revenues for the third quarter of 2008 included $13.9 million from land sales, which contributed net losses of $7.2 million to pretax losses in 2008, compared to $8.3 million from land sales for the third quarter of 2007, which contributed a net gain of $1.3 million to pretax losses in 2007.

New orders of 1,284 units for the quarter ended September 30, 2008, represented a decrease of 31.6 percent, compared to new orders of 1,876 units for the same period in 2007. For the third quarter of 2008, new order dollars declined 33.8 percent to $325.3 million from $491.4 million for the third quarter of 2007. Backlog at the end of the third quarter of 2008 decreased 19.8 percent to 2,969 units from 3,702 units at June 30, 2008, and decreased 31.5 percent from 4,334 units at the end of the third quarter of 2007. At September 30, 2008, the dollar value of the Company's backlog was $768.9 million, reflecting a decrease of 19.5 percent from June 30, 2008, and a decline of 38.0 percent from September 30, 2007.

Housing gross profit margins averaged 11.8 percent prior to inventory valuation adjustments and write-offs for the quarter ended September 30, 2008, compared to 17.4 percent for the same period in 2007. This decrease was primarily due to increased sales incentives and price reductions that related to home deliveries for the third quarter of 2008. Including the valuation adjustments, housing gross profit margins averaged 0.8 percent for the third quarter of 2008, compared to negative 0.3 percent for the same period in 2007. The gross profit margin from land sales was negative 52.0 percent for the third quarter ended September 30, 2008, compared to 15.7 percent for the same period in 2007. Selling, general and administrative expenses, as a percentage of homebuilding revenue, were 11.6 percent for the third quarter of 2008, compared to 13.8 percent for the second quarter of 2008 and 12.3 percent for the third quarter of 2007.

This decrease was primarily attributable to cost saving initiatives, including lower marketing and advertising costs per unit, partially offset by severance and model abandonment costs totaling $4.9 million. For the third quarter ended September 30, 2008, selling, general and administrative expense dollars decreased $26.8 million from the same period in the prior year. The homebuilding segments capitalized all interest incurred during the third quarters ended September 30, 2008 and 2007.

Corporate expenses were $14.3 million for the third quarter of 2008, compared to $11.1 million for the same period in the prior year. This increase was primarily due to a $2.0 million decline in the market value of investments included within the Company's benefit plans.

During the third quarter of 2008, the Company provided $101.0 million of cash from operations and $56.2 million of cash from the termination of a deferred compensation plan for distribution to participants in the fourth quarter of 2008. This termination provides a current year tax benefit to the Company. The Company used $11.7 million for investing and financing activities.

The Company's financial services segment, which includes mortgage, title, escrow and insurance services, reported pretax earnings of $6.0 million for the third quarter of 2008, compared to pretax earnings of $6.8 million for the same period in 2007. This decrease was primarily attributable to a 15.1 percent decline in the number of mortgages originated, due to a slowdown in the homebuilding market, and to an 8.1 percent decrease in average loan size, partially offset by a $1.2 million gain related to the 2008 implementation of Staff Accounting Bulletin No. 109, which requires that servicing rights related to interest rate lock commitments be recorded at fair value. The capture rate of mortgages originated for homebuilding customers of the Company was 82.8 percent for the third quarter of 2008, compared to 77.7 percent for the same period in 2007.

RESULTS FOR THE FIRST NINE MONTHS OF 2008

For the nine months ended September 30, 2008, the Company reported a consolidated net loss of $336.7 million, or $7.94 per diluted share, compared to a loss of $131.6 million, or $3.12 per diluted share, for the same period in 2007. The Company had inventory and other valuation adjustments, joint venture impairments, and option deposit and feasibility write-offs totaling $273.2 million, as well as a noncash income tax charge of $140.5 million, for the nine months ended September 30, 2008.

The homebuilding segments reported a pretax loss of $303.2 million during the first nine months of 2008, compared to a pretax loss of $213.7 million for the same period in 2007. The higher loss was primarily due to the impact of inventory valuation adjustments and write-offs, a decline in closings and lower margins.

Homebuilding revenues decreased 34.4 percent to $1.4 billion for the first nine months of 2008, compared to $2.1 billion for the same period in 2007. This decline was primarily attributable to closings totaling 5,388 units for the nine months ended September 30, 2008, reflecting a 25.8 percent decrease from closings totaling 7,258 units for the same period in the prior year, and to a 12.4 percent decrease in the average closing price of a home, which declined to $255,000 for the nine-month period ended September 30, 2008, from $291,000 for the nine-month period ended September 30, 2007. Homebuilding revenues for the first nine months of 2008 included $25.4 million from land sales, which contributed a net loss of $6.2 million to pretax losses in 2008, compared to $15.2 million from land sales for the first nine months of 2007, which contributed a net gain of $2.4 million to pretax losses in 2007.

New orders of 5,488 units for the nine months ended September 30, 2008, represented a decrease of 25.7 percent, compared to new orders of 7,386 units for the same period in 2007. For the nine months of 2008, new order dollars declined 34.3 percent to $1.4 billion from $2.1 billion for the same period in 2007.

Housing gross profit margins averaged 12.1 percent prior to inventory and joint venture valuation adjustments and write-offs for the nine months ended September 30, 2008, compared to 18.3 percent for the same period in 2007. This decrease was primarily due to price reductions and increased sales incentives that related to home deliveries for the first nine months of 2008. Including the valuation and other adjustments, housing gross profit margins averaged negative 4.4 percent for the first nine months of 2008, compared to 5.4 percent for the same period in 2007. The gross profit margin from land sales was negative 24.3 percent for the nine months ended September 30, 2008, compared to 15.7 percent for the same period in 2007. Selling, general and administrative expenses, as a percentage of homebuilding revenue, were 13.6 percent for the first nine months of 2008, compared to 12.5 percent for the same period in 2007. This increase was primarily attributable to a decline in revenues, as well as to severance and model abandonment costs totaling $11.7 million and a rise in marketing and advertising costs per unit, partially offset by a $15.4 million goodwill impairment charge in the first quarter of 2007. For the nine months ended September 30, 2008, selling, general and administrative expense dollars decreased $76.6 million from the same period in the prior year. The homebuilding segments capitalized all interest incurred during the nine-month periods ended September 30, 2008 and 2007.

Corporate expenses were $31.5 million for the first nine months of 2008, compared to $24.7 million for the same period in the prior year. This increase was primarily due to a $5.0 million decline in the market value of investments included within the Company's benefit plans and higher compensation costs.

The Company's financial services segment, which includes mortgage, title, escrow and insurance services, reported pretax earnings of $18.1 million for the first nine months ended September 30, 2008, compared to pretax earnings of $24.6 million for the same period in 2007. This decrease was primarily attributable to a 23.0 percent decline in the number of mortgages originated, due to a slowdown in the homebuilding market, and to an 11.6 percent decrease in average loan size, partially offset by a $4.5 million gain related to the 2008 implementation of Staff Accounting Bulletin No. 109, which requires that servicing rights related to interest rate lock commitments be recorded at fair value. The capture rate of mortgages originated for the Company's homebuilding customers was 82.7 percent for the first nine months of 2008, compared to 78.9 percent for the same period in 2007.

NONCASH TAX CHARGE FOR A DEFERRED TAX VALUATION ALLOWANCE

During the third quarter of 2008, the Company recorded a noncash tax charge of $16.5 million for an additional valuation allowance related to its deferred tax assets. This was reflected as a charge to income tax expense and resulted in a reduction of the Company's deferred tax assets. The income tax valuation allowance charges totaled $140.5 million for the nine months ended September 30, 2008, bringing the total balance of the deferred tax valuation allowance to $215.7 million as of September 30, 2008. Consequently, the Company's effective tax benefit rate was 18.5 percent for the quarter ended September 30, 2008, compared to an effective tax benefit rate of 42.1 percent for the same period in 2007. Due to the uncertainty of current market conditions, the Company is unable to provide precise annual effective rate guidance at this time.

Headquartered in Southern California, Ryland is one of the nation's largest homebuilders and a leading mortgage-finance company. Since its founding in 1967, Ryland has built more than 280,000 homes and financed more than 235,000 mortgages. The Company currently operates in 15 states and 19 homebuilding divisions across the country and is listed on the New York Stock Exchange under the symbol "RYL." For more information, please visit www.ryland.com.

Note: Certain statements in this press release may be regarded as "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, and may qualify for the safe harbor provided for in Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements represent the Company's expectations and beliefs concerning future events, and no assurance can be given that the future results described in this press release will be achieved. These forward-looking statements can generally be identified by the use of statements that include words such as "anticipate," "believe," "estimate," "expect," "foresee," "goal," "intend," "likely," "may," "plan," "project," "should," "target," "will" or other similar words or phrases. All forward-looking statements contained herein are based upon information available to the Company on the date of this press release. Except as may be required under applicable law, the Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of the Company's control, that could cause actual results to differ materially from the results discussed in the forward-looking statements. The factors and assumptions upon which any forward-looking statements herein are based are subject to risks and uncertainties which include, among others:

-- economic changes nationally or in the Company's local markets, including volatility and increases in interest rates, inflation, changes in consumer demand and confidence levels and the state of the market for homes in general;

-- instability and uncertainty in the mortgage lending market, including revisions to underwriting standards for borrowers;

-- the availability and cost of land and the future value of land held or under development;

-- increased land development costs on projects under development;

-- shortages of skilled labor or raw materials used in the production of houses;

-- increased prices for labor, land and raw materials used in the production of houses;

-- increased competition;

-- failure to anticipate or react to changing consumer preferences in home design;

-- increased costs and delays in land development or home construction resulting from adverse weather conditions;

-- potential delays or increased costs in obtaining necessary permits as a result of changes to laws, regulations, or governmental policies (including those that affect zoning, density, building standards and the environment);

-- delays in obtaining approvals from applicable regulatory agencies and others in connection with the Company's communities and land activities;

-- changes in the Company's effective tax rate and assumptions and valuations related to its tax accounts;

-- the risk factors set forth in the Company's most recent Annual Report on Form 10-K; and

-- other factors over which the Company has little or no control.

THE RYLAND GROUP, INC. and Subsidiaries CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (in thousands, except share data) Three months ended September 30, Nine months ended September 30, 2008 2007 2008 2007 REVENUES Homebuilding $ 526,236 $ 717,487 $ 1,398,119 $ 2,131,428 Financial services 17,608 19,750 49,772 60,657 TOTAL REVENUES 543,844 737,237 1,447,891 2,192,085 EXPENSES Cost of sales 537,555 719,487 1,468,698 2,078,701 (Earnings) loss from unconsolidated joint ventures (82 ) (9 ) 42,625 (128 ) Selling, general and administrative 61,120 87,969 189,967 266,546 Financial services 11,631 12,920 31,722 36,012 Corporate 14,299 11,131 31,495 24,681 Expenses related to early retirement of debt - 260 - 260 TOTAL EXPENSES 624,523 831,758 1,764,507 2,406,072 Earnings (loss) before taxes (80,679 ) (94,521 ) (316,616 ) (213,987 ) Tax expense (benefit) (14,961 ) (39,781 ) 20,057 (82,371 ) NET EARNINGS (LOSS) $ (65,718 ) $ (54,740 ) $ (336,673 ) $ (131,616 ) NET EARNINGS (LOSS) PER COMMON SHARE Basic $ (1.54 ) $ (1.30 ) $ (7.94 ) $ (3.12 ) Diluted (1.54 ) (1.30 ) (7.94 ) (3.12 ) AVERAGE COMMON SHARES OUTSTANDING Basic 42,606,667 41,958,345 42,420,301 42,151,808 Diluted 42,606,667 41,958,345 42,420,301 42,151,808

THE RYLAND GROUP, INC. and Subsidiaries CONSOLIDATED BALANCE SHEETS (in thousands, except share data) September 30, December 31, 2008 2007 (Unaudited) ASSETS Cash and cash equivalents $ 344,833 $ 243,614 Housing inventories Homes under construction 663,499 717,992 Land under development and improved lots 596,340 949,726 Inventory held-for-sale 95,874 69,225 Consolidated inventory not owned 35,530 76,734 Total inventories 1,391,243 1,813,677 Property, plant and equipment 56,296 75,538 Net deferred taxes 80,077 158,065 Other 192,326 260,426 TOTAL ASSETS 2,064,775 2,551,320 LIABILITIES Accounts payable 112,268 114,050 Accrued and other liabilities 350,155 404,545 Debt 784,147 839,080 TOTAL LIABILITIES 1,246,570 1,357,675 MINORITY INTEREST 33,787 68,919 STOCKHOLDERS' EQUITY Common stock, $1.00 par value: Authorized--200,000,000 shares Issued--42,644,467 shares at September 30, 2008 (42,151,085 shares at December 31, 2007) 42,644 42,151 Retained earnings 738,297 1,078,521 Accumulated other comprehensive income 3,477 4,054 TOTAL STOCKHOLDERS' EQUITY 784,418 1,124,726 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,064,775 $ 2,551,320

THE RYLAND GROUP, INC. and Subsidiaries SEGMENT INFORMATION (Unaudited) Three months ended September 30, Nine months ended September 30, 2008 2007 2008 2007 EARNINGS (LOSS) BEFORE TAXES (in thousands) Homebuilding North $ (35,734 ) $ 9,903 $ (121,970 ) $ 39,065 Southeast (4,321 ) (9,215 ) (64,308 ) 7,651 Texas (14,917 ) 5,433 (18,747 ) 20,349 West (17,385 ) (96,081 ) (98,146 ) (280,756 ) Financial services 5,977 6,830 18,050 24,645 Corporate and unallocated (14,299 ) (11,391 ) (31,495 ) (24,941 ) Total $ (80,679 ) $ (94,521 ) $ (316,616 ) $ (213,987 ) NEW ORDERS Units North 446 576 1,575 2,065 Southeast 321 537 1,507 2,031 Texas 312 400 1,533 1,911 West 205 363 873 1,379 Total 1,284 1,876 5,488 7,386 Dollars (in millions) North $ 120 $ 172 $ 427 $ 652 Southeast 83 135 371 562 Texas 72 86 334 398 West 50 98 222 449 Total $ 325 $ 491 $ 1,354 $ 2,061 CLOSINGS Units North 603 692 1,589 1,998 Southeast 610 728 1,656 2,210 Texas 484 712 1,317 1,955 West 320 363 826 1,095 Total 2,017 2,495 5,388 7,258 Average closing price (in thousands) North $ 284 $ 325 $ 285 $ 321 Southeast 254 292 253 303 Texas 219 204 217 211 West 248 348 258 357 Total $ 254 $ 284 $ 255 $ 291 OUTSTANDING CONTRACTS September 30, Units 2008 2007 North 952 1,224 Southeast 797 1,460 Texas 892 976 West 328 674 Total 2,969 4,334 Dollars (in millions) North $ 272 $ 398 Southeast 209 419 Texas 203 214 West 85 210 Total $ 769 $ 1,241 Average price (in thousands) North $ 285 $ 323 Southeast 262 287 Texas 228 219 West 259 311 Total $ 259 $ 286

THE RYLAND GROUP, INC. and Subsidiaries FINANCIAL SERVICES SUPPLEMENTAL INFORMATION (Unaudited) (in thousands, except origination data) Three months ended Nine months ended September 30, September 30, RESULTS OF OPERATIONS 2008 2007 2008 2007 Revenues Net gains on sales of mortgages $ 8,705 $ 6,010 $ 23,279 $ 21,329 Origination fees 4,646 6,129 12,600 18,359 Title/escrow/insurance 3,847 7,279 12,854 20,182 Interest and other 410 332 1,039 787 Total revenues 17,608 19,750 49,772 60,657 General and administrative expenses 11,631 12,920 31,722 36,012 Pretax earnings $ 5,977 $ 6,830 $ 18,050 $ 24,645 OPERATIONAL DATA Retail operations: Originations (units) 1,562 1,839 4,159 5,401 Ryland Homes closings as a percentage of total closings 99.6 % 99.7 % 99.4 % 99.5 % Ryland Homes origination capture rate 82.8 % 77.7 % 82.7 % 78.9 % Investment operations: Mortgage-backed securities and notes receivable average balance $ 369 $ 406 $ 374 $ 462

SOURCE: The Ryland Group, Inc.

The Ryland Group, Inc. Drew Mackintosh, Vice President, Investor Relations (818) 223-7548 Marya Barlow, Director, Communications (818) 223-7591