D.R. Horton Says Home Orders Plunged 40%; Will Post Q3 Loss

Number-two U.S. homebuilder D.R. Horton said Tuesday Q3 new home orders fell 40% from a year ago, and that it will post a Q3 loss due to significant asset impairment charges. Orders fell to 8,559 homes from 14,316, while the value of houses ordered fell an even-steeper 47% to $2 billion. "Inventory levels of both new and existing homes remained high, and we expect the housing environment to remain challenging," said CEO Donald J. Tomnitz. He said the company expects a loss for both Q3 and the nine months ending June 30; analysts had expected it to earn $0.07/share in the quarter. Cancellations climbed to 38%, up from 32% in Q2. Historically, cancellations are 16-20%. During its previous earnings call, the company blamed growing cancellations on buyers who bought on condition of selling a previous home, which they were unable to do, and people simply changing their minds. Also, banks have begun implementing stricter lending guidelines, resulting in fewer eligible borrowers. In a note Monday, Banc of America Securities said it expects homebuilders will on average report a 20% drop in net orders. In Q2, D.R. Horton saw profits plunge 85%. Shares are down 25.3% YTD.

Sources: Press release, MarketWatch, Bloomberg, Wall Street Journal
Commentary: D. R. Horton Valuation Too Good to Pass Up • D.R. Horton's 37% Decline In New Orders: Bad News For Housing • D.R. Horton Posts 85% Plunge in Q2 Earnings; Misses Street
Stocks/ETFs to watch: D.R. Horton Inc. (DHI). Competitors: Lennar Corp. (LEN), Pulte Homes Inc. (PHM), KB Home (KBH), Toll Brothers Inc. (TOL), Centex Corp. (CTX). ETFs: streetTRACKS SPDR Homebuilders ETF (XHB), iShares Dow Jones US Home Construction (ITB)

Seeking Alpha's news briefs are combined into a pre-market summary called Wall Street Breakfast. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.