DR Horton's new home orders skid

DALLAS, Oct 17, 2007 (AP via COMTEX) -- DHI | charts | news | PowerRating -- D.R. Horton Inc. said Tuesday that orders for new homes fell 39 percent and cancellations rose 48 percent in its fourth quarter, indicating that the slump in the nation's homebuilding industry persisted after a weak summer.

Chairman Donald R. Horton said he expected the housing market "to remain challenging." Its shares fell more than 5 percent.

The housing market has slumped as the pool of eligible buyers has shrunk due to tighter mortgage requirements, high prices and several years of robust sales. That's led to a glut of homes on the market, forcing builders to cut prices and write down the value of their land and options.

Horton said it took orders for 6,374 homes worth $1.3 billion in the quarter ended Sept. 30. A year ago, orders reached 10,430 homes worth $2.5 billion.

The plunge in orders was even sharper than analysts had expected.

Horton's cancellations hit 48 percent, more than twice the normal rate and up from 38 percent in the spring.

Shares of Horton fell 72 cents, or 5.3 percent, to close at $12.86 Tuesday. That's near the bottom of the company's 52-week range of $12.46 to $31.13.

The July-September quarter was the last in Horton's fiscal year. For the year, the company said orders dropped 35 percent to 33,687 homes worth $8.2 billion.

The Fort Worth-based builder plans to report financial results Nov. 20.

Before Tuesday's comments, analysts expected the company to report a loss of 32 cents per share for its fourth quarter and $2.37 per share for the fiscal year.

The downturn has been especially severe in some previously hot markets, including parts of California where Horton is active.

Net sales orders fell 58 percent in California and 54 percent in the rest of the West, while declining a more modest 27 percent in the Southeast and south Central regions.

"Market conditions for new home sales declined in our September quarter as inventory levels of both new and existing homes remained high while pricing remained very competitive," Horton, the company chairman, said in a statement.

"Buyers continued to approach the home buying decision cautiously," he added. "We expect the housing environment to remain challenging."

Horton said his company would try to reduce its housing inventory and pay down debt.

Wachovia Capital Markets analyst Carl Reichardt said Horton's average order price was $205,400, down 15 percent from a year ago and lower than he had expected.

Reichardt said the most troubling news was that in California, prices fell 38 percent on average but orders still tumbled, "demonstrating to us that a clearing price has yet to be found."

Banc of America Securities analyst Daniel Oppenheim said Horton has gained some sales in Southern California and Phoenix by aggressively cutting prices, which will force other builders to match their cuts, leading to new writedowns.

Oppenheim said the sharp increase in cancellations was likely due to lenders not funding previously approved loans.

Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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