Home builder D.R. Horton Inc. said on Tuesday declining home values would lead to its first quarterly loss since it listed on the New York Stock Exchange in 1995, sending its shares to a three-year low.
Hurt by the deteriorating U.S. housing market, the No. 1 U.S. home builder said net sales orders in its fiscal third quarter, ended June 30, fell 40 percent to 8,559 homes. The dollar value of the orders dropped 47 percent to $2.0 billion.
“Market conditions for new home sales declined in our June quarter as inventory levels of both new and existing homes remained high, and we expect the housing environment to remain challenging,” Chairman Donald Horton said in a statement.
Regionally, the sharpest decline came in California, where the value of orders fell 61.9 percent to $307.1 million.
The company said that as a result of the weak market, it will post significant asset impairments that will result in a loss for both the third quarter and the nine-month period.
“D.R. Horton was as aggressive as anyone in buying land during the bubble years,” said Eric Landry, analyst at Morningstar, in Chicago. “They bought plenty of land when land prices were dear. Home prices now have declined such that there are several communities that aren’t profitable.”
Horton’s third-quarter cancellation rate was 38 percent, up from 32 percent in its fiscal second quarter.
The company’s traditional customer is a first- or second-time home buyer. It builds homes in 27 states with sales prices ranging from $90,000 to more than $900,000.
Executives of some of the largest U.S. home builders, including Horton Chief Executive Donald Tomnitz, have said they do not expect the market to rebound this year — and probably not in the first half of next year, either.
“The fundamental headwinds are stiff right now and no one has any idea when it will turn around,” said Morningstar’s Landry.
Late last month, home builders Lennar Corp. and KB Home reported quarterly losses.
Horton shares fell their worst level since July 2004 Tuesday. So far this year the shares have declined 26.4 percent, in line with a 26.6 percent slide in the Dow Jones U.S. home builders index.