Home builder: Spring hasn't sprung

D.R. Horton reports sharp drops in sales value, volume in three months ending in March; weakness is widespread across nation.

By Chris Isidore, CNNMoney.com senior writer

NEW YORK (CNNMoney.com) -- In the latest sign of trouble for the battered real estate market, one of the nation's top home builders warned Tuesday that it has yet to see the normal start of the spring home buying season, as it reported sharply lower sales for the first three months of the year.

D.R. Horton (Charts), the nation's No. 2 home builder, reported that the number of new homes it sold in its fiscal second quarter fell nearly 37 percent. The value of those homes fell about 40 percent to $2.6 billion in the period, which ended March 31.

One of the nation's leading home builders is not seeing the normal start to the spring home selling season.
One of the nation's leading home builders is not seeing the normal start to the spring home selling season.
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How do you view the recent weak home sales reports?
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The home building sector has been battered by a glut of homes for sale on the market, created during the record building boom of 2005 and early 2006. New home sales and housing starts have plunged in recent months, and price measures for both new and existing homes are falling.

The National Association of Home Builders has reported that problems in the subprime mortgage market are also causing problems for the industry, as it cuts off the supply of financing or raises the costs for many potential buyers.

D.R. Horton said the declines in volume and sales value were widespread across all the regions where the company operates -- the Northeast, the various parts of the South, California and the rest of the West. Each had declines of about 20 percent or more.

The worst declines were in California, where volume was down 59 percent, and value of the homes sold fell 56.8 percent.

"Market conditions for new home sales continue to be challenging in most of our markets as inventory levels of both new and existing homes remain high," said a statement from chairman Donald R. Horton.

The company said it continues to see an increase in the use of sales incentives in many of its markets. And it said that its cancellation rate, which calculates sales orders cancelled divided by gross sales orders, was 32 percent in the quarter, which it said was essentially unchanged from the first quarter.

The company claims to be the nation's largest builder based on the number of homes sold in its previous fiscal year, although its annual revenues trail those of Lennar (Charts).

Horton did not give any specific guidance on future sales forecasts or earnings for the second quarter. Last month Horton CEO Donald Tomnitz told an analyst conference that the market for new homes "is going to suck, all 12 months of the calendar year."

Analysts are still forecasting Horton to earn 27 cents a share in its fiscal second quarter, although that's down from the $1.11 it earned in the year earlier period. But at least it has been able to avoid the losses that have become common place across the sector.

No. 3 builder Pulte Homes (Charts) reported a loss in its most recent period, as did No. 4 Centex (Charts) and New Jersey-based Hovnanian Enterprises (Charts). Lennar and No. 5 KB Home (Charts) both reported losses in their quarters ending in November, although both returned to an operating profit in their most recent period.

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