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— D.R. Horton Inc., the nation's largest homebuilder, said Tuesday its losses in the fiscal third-quarter narrowed as the value of its inventory of unsold homes and land holdings showed signs of stabilizing, but the results fell far short of Wall Street's expectations.
During a conference call with Wall Street analysts, Donald J. Tomnitz, Horton's president and chief executive, said an improving market is still "a couple of years away."
Shares closed up 3 cents to $11.25.
The Fort Worth, Texas-based company posted a loss of $339.3 million, or $1.26 a share, in the quarter that ended June 30. That's down from the loss of $823.8 million, or $2.62 a share, in the same period last year.
The latest quarter included pretax charges of $330.4 million to write down the value of unsold homes, deposits and other costs as the company walked away from land option contracts.
Still, that was an improvement from the $834.1 million in charges the company booked in the previous quarter, and down from $852 million in the same quarter a year ago.
Revenue plunged 44 percent to $1.43 billion from $2.55 billion a year earlier.
Tomnitz said the company has little power to raise prices in its communities as the housing market continues to deteriorate under the weight of rising foreclosures, a weakening U.S. economy and tighter mortgage lending.
Horton's pricing woes are likely to continue through this year due to a persistently high inventory of unsold homes, concluded Anna Torma, an analyst with Soleil Securities.
"We expect 2008 to remain challenging," she wrote in a research note on the builder.
Analysts surveyed by Thomson Financial expected the builder to report a loss of 70 cents per share on sales of $1.44 billion. Wall Street estimates for Horton ranged from a loss of $3.46 to a loss of 2 cents a share, reflecting, in part, the divergent view among analysts over the size of write-downs builders might take.
Like other builders, Horton's business has been squeezed as the housing market downturn worsened.
Tomnitz criticized the landmark housing rescue bill signed into law last week, saying its key provision — a temporary $7,500 tax credit for first-time homebuyers — falls short of what's needed to jump-start the housing market.
"While the temporary tax credit is certainly a positive for buyers ... the tax credit does not offset the elimination of the (down payment assistance program), which our industry so vitally needs," Tomnitz said.
The down payment assistance program was a loophole in the Federal Housing Administration rules that let a seller channel down payment money through a charity and onto a home buyer.
The new housing law, however, prohibits the FHA from insuring mortgages in which the borrower's down payment is paid by the seller beginning Oct. 1.
Horton used the program to help almost 30 percent of its buyers afford to purchase a home in the quarter.
Even with that cash assistance for buyers, demand for new homes is down, adding to a glut of unsold and foreclosed properties on the market. Supply is around 10 months — roughly twice the level of a healthy balance between supply and demand.
Meanwhile, falling home prices and rising unemployment and energy prices continue to scare off many would-be homebuyers.
Horton, which has operations in 27 states, said its net sales orders for the quarter totaled 5,501 homes worth $1.2 billion. That's down from 8,559 homes valued at $2 billion in the same period last year.
The builder closed 6,167 homes during the quarter, down from 9,643 homes in the year-ago period, because almost four out of every 10 buyers backed out of their contracts.
As of June 30, the builder's orders for new homes stood at 8,281 homes valued at $1.9 billion. That's down from a backlog of 15,801 homes valued at $4.4 billion a year earlier.
The average sales price for Horton homes fell about 5 percent from the prior-year to $224,800.
The company said it remains focused on reducing inventory, cutting costs and generating cash flow.
Horton closed the quarter with $390 million in cash from operations, for a total of $1.4 billion so far this fiscal year.
For the first nine months of the fiscal year, Horton's loss widened to $1.8 billion, or $5.81 per share. That compares with a loss of $662.3 million, or $2.11 per share, in the same period last year.
Homebuilding revenue was $4.8 billion, down from $8 billion in the same period ended June 2007.
The company declared a quarterly cash dividend of 7.5 cents a share payable on Aug. 28.
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On the Net:
D.R. Horton: http://www.drhorton.com/
