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D.R. Horton swings to quarterly loss

Homebuilder D.R. Horton Inc. said Tuesday it swung to a loss in the fourth quarter as the company again wrote down the value of unsold homes and land options.
/ Source: The Associated Press

Homebuilder D.R. Horton Inc. said Tuesday it swung to a loss in the fourth quarter as the company again wrote down the value of unsold homes and land options, and the housing market showed few signs of improvement.

Donald R. Horton, chairman of the nation’s largest homebuilder by deliveries, said tighter lending standards and more cautious consumers contributed to further decline in housing during the late summer, with the numbers of unsold homes remaining high.

Horton said the housing market would “remain challenging” and that next year is likely to be worse. Horton said his company was cutting prices.

Also Tuesday, the Commerce Department reported that construction of single-family homes fell 7.3 percent in October, the seventh straight month of decline. Apartment construction jumped 44 percent, however.

The Horton results came the day after the National Association of Home Builders reported that homebuilder confidence remained at its lowest level since the group started measuring in 1985.

Fort Worth-based Horton said its loss for the quarter ended Sept. 30 totaled $50.1 million, or 16 cents per share, compared with profit of $277.7 million, or 88 cents per share, a year ago.

The latest quarter included pretax charges of $278.3 million for inventory impairments, $40.3 million of write-offs for land options that the company doesn’t intend to exercise, and a pretax goodwill-impairment charge of $48.5 million.

Sales declined 35 percent to $3.12 billion from $4.8 billion a year ago.

The results still topped the forecast of analysts surveyed by Thomson Financial, who predicted a loss of 66 cents per share on sales of $2.9 billion.

Analysts said they were surprised that Horton generated $800 million in cash flow during the September quarter by cutting costs, and they said the builder’s write-downs were smaller in relative terms than those of other builders. 11.03 -0.22 -1.96

Shares of Horton fell 22 cents to $11.03 in midday trading. The shares fell 7.5 percent Monday after the gloomy outlook from the home builders association.

Horton executives said resistance to higher prices was especially strong in California and Las Vegas, followed closely by Florida and Arizona. Horton said it would take price cuts and better mortgage availability before markets such as California can recover.

Chairman Horton said the best markets included Dallas, Houston and Austin in Texas, along with Chicago. But he said all would probably weaken next year.

Horton closed 11,733 homes in the September quarter, down 32 percent from 17,261 a year ago.

The company said its cancelation rate rose to 48 percent, up from 38 percent in the previous three months. Builders say buyers are backing out because they think prices will fall further or they can’t sell their current home.