U.S. homebuilder DR Horton reported a 37% drop in Q2 orders yesterday, an indication that the traditionally strong spring selling season is unlikely to provide a hoped-for rebound in the housing market this year. Horton's shares fell 2% to $21.60 on the news. The company reported orders for 9,983 homes in the quarter, down from 15,771 a year ago. The value of the orders plummeted 41% to $2.6 billion, down from $4.4 billion in the year-ago period. California saw the sharpest drop in orders with 59%; the Northeast performed best with a 21% decline. The 37% overall order decline follows a 23% drop in Q1. The company's 32% cancellation rate is flat with previous quarters and remains above historical levels. Horton, which caters to first-time home buyers, is particularly susceptible to the tightening of credit standards that has resulted from skyrocketing defaults in the subprime mortgage sector. The company will report fiscal Q2 earnings on April 19.
Sources: Wall Street Journal, Bloomberg, Reuters, MarketWatch, MoneyCentral
Commentary: D.R. Horton's 37% Decline In New Orders: Bad News For Housing • Toll: Housing Slump Almost Done; Horton: Not So Fast • Ten Stock Picks From Barbara Marcin of Gamco Investors
Stocks/ETFs to watch: D.R. Horton, Inc. (DHI). Competitors: Centex Corp. (CTX), Lennar Corp. (LEN), Pulte Homes Inc. (PHM). ETFs: iShares Dow Jones US Home Construction (ITB), SPDR S&P Homebuilders (XHB)
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