Homebuilders offer bleak outlook and post losses

[Dover]

June 3, 2008, 7:49PM
Homebuilders offer bleak outlook and post losses


By ALEX VEIGA AP Business Writer
© 2008 The Associated Press

LOS ANGELES — Homebuilder D.R. Horton said Tuesday the industry could face tough times until 2010, and underscoring that point, Toll Bros. and Hovnanian Enterprises Inc. each reported a second-quarter loss.

"I believe the industry will continue to face rising pressures for certainly the next 12 to 18 months," said Don Tomnitz, D.R. Horton's president and chief executive, adding that "2010 will be the earliest we get a more solid homebuilding environment."

Homebuilders are struggling to sell their homes at a time when many buyers remain reluctant to enter the market because they expect home prices to keep falling. A glut of unsold homes has also hurt builders, forcing many to step up incentives and discounts, shrinking their profits.

Tomnitz said home prices may still have more to drop in many of the hardest-hit markets, like Florida, California, Las Vegas and Arizona.

"But, clearly, to me we've come down more than we're going to have to come down on a going forward basis," he said.

When order cancellation rates begin to fall, Tomnitz said, that will be an indication of improvement in the market. He noted that cancelations were down in the latest quarter.

But builders' balance sheets are also taking a beating as the companies write down the value of thousands of acres of land purchased during the housing boom that is now worth less than they paid.

The top 11 homebuilders took a combined $22.9 billion in impairment charges between the third quarter of 2006 and the first quarter of this year, according to JPMorgan, which hosted its 3rd Annual Basics and Industrials Conference in New York Tuesday where many building executives spoke.

Cont'd

http://www.chron.com/disp/story.mpl/ap/business/5817322.html