Home sales sink; 2 builders lose
D.R. Horton, Beazer take land write-downs
Copyright © 2007, Chicago Tribune
July 27, 2007
The bad news for the housing industry continued Thursday, when the government said new-home sales in June fell more than expected and two major home builders said they swung to quarterly losses after taking massive charges for unsold inventory and unused land.
Sales of new homes declined 6.6 percent, the most since January, to an annual rate of 834,000, the Commerce Department said. Economists expected a drop to a pace of 890,000.
The median price of a new home fell 2.2 percent last month, to $237,900. The number of homes for sale held at 537,000 during the month, and the supply of homes at the current sales rate rose to 7.8 months' worth, the most since March, up from 7.4 months. Purchases fell 27 percent in the Northeast, 23 percent in the West and 17 percent in the Midwest. Sales rose 7.6 percent in the South.
Economists consider sales of new homes a leading indicator of market demand because they are recorded when a contract is signed. Home resales are compiled mainly from closings that usually reflect contracts signed a month or two earlier. Purchases of new homes account for about 15 percent of total home sales.
Also Thursday, D.R. Horton Inc. posted a third-quarter loss after writing down the value of unused land and warned there was no recovery in sight for the troubled housing industry.
"It is now clear that the selling season did not materialize this year," said Chief Executive Donald Tomnitz. "It is unclear to us when the housing recovery will begin. We don't see one on the horizon."
Horton was pushed to a loss by pretax charges of $852 million reflecting lower value of land and other holdings and $426 million in the value of intangibles such as brand name.
The Ft. Worth-based builder said it lost $823.8 million, or $2.62 a share, compared with a profit of $292.8 million, or 93 cents a share, a year earlier. Analysts expected a loss of 35 cents a share in the most recent period, according to Thomson Financial. Revenue from home building fell 30 percent, to $2.5 billion, as the number of homes closed plummeted to 9,643 from 13,377 a year ago.
Beazer Homes USA Inc. also said it swung to a third-quarter loss after it cut prices to spur sales and took major charges.
The Atlanta-based company posted a loss of $123.01 million, or $3.20 a share. Wall Street was expecting a loss of 32 cents a share. A year ago Beazer earned $102.62 million, or $2.37 a share. The latest quarter included pretax charges of $188.5 million to write down the value of inventory and goodwill, as well as to forfeit options on land. Revenue fell nearly 37 percent, to $761.01 million, as home closings plunged to 2,666 from 4,156.
Shares of D.R. Horton declined by 32 cents, or 1.8 percent, Thursday to close at $17.16. Beazer stock lost $1.48, or 8.7 percent, to close at 15.56. Both trade on the New York Stock Exchange.