The raucous party is close to over in the once red-hot housing market, as several home builders reported a huge drop in their most recent quarterly sales reports.
Shares of several major U.S. home builders fell this week after the National Association of Realtors said sales of existing U.S. homes, often seen as a precursor to new home sales, fell by 4.1 percent in July from June to their lowest level since January 2004.
The decline in the housing market seems to be regional in nature, with some markets still seeing slow-but-steady growth. But demand for new homes in several of the largest markets for home builders on the East Coast and in California has plummeted.
Following is a summary of reports from a few of the nation’s largest publicly traded home builders.
Toll Brothers, Horsham, Pa., said its fiscal third-quarter profit fell by 19 percent to $174.6 million, compared with last year’s third-quarter record of $215.5 million. Sales for the fiscal third quarter were $1.53 billion compared to $1.55 billion for the same period in 2005. Toll Brothers forecast home deliveries would range from 7,000 to 8,000 in fiscal 2007 at an average price of $635,000 to $645,000.
Robert Toll, the company’s chairman and CEO, said, “The continuing malaise in the housing market, we believe, is the result of an oversupply of inventory and a decline in confidence. The speculative buyers of 2004 and 2005 are now sellers; builders that built speculative homes are trying to move them by offering large incentives and discounts; and some anxious buyers are canceling contracts for homes already being built.”
Toll said once the current oversupply of homes is absorbed and buyers become confident that home prices have stabilized, “The market will return to firm footing.”
Pulte Homes, Bloomfield Hills, Mich., said income for the second quarter ended June 30 declined 20 percent to $243.9 million, compared with $305.2 million for the prior year second quarter. Consolidated revenues for the quarter were $3.4 billion, an increase of 3 percent over prior year revenues of $3.3 billion. “Our second-quarter results reflect the changing dynamics being experienced in the home-building industry,” said Richard Dugas Jr., president and CEO of Pulte Homes.
Net new home orders for the quarter were 9,455 homes, valued at $3.1 billion, which represent declines of 30 percent and 29 percent, respectively, from prior year second-quarter results.
DR Horton Inc., Fort Worth, Texas, reported net income for the quarter ended June 30, of $292.8 million, compared with $371.7 million for the same quarter of fiscal year 2005. Consolidated revenue for the quarter increased 9 percent to $3.7 billion, from $3.4 billion in the same quarter of fiscal year 2005. Homes closed in the quarter increased 9 percent to 13,377 homes from 12,269 homes in the year-ago quarter.
Donald R. Horton, the company’s chairman of the board, said, “As we indicated when we reported our net sales orders last week, the current home sales environment is characterized by an increase in both existing and new homes available for sale, higher than normal cancellation rates and an increase in the use of sales incentives in many of our markets.”