D.R. Horton Inc., the largest U.S. home builder, said Thursday that quarterly profit dropped 21%, a week after the company said orders fell and slashed its forecast because of eroding market demand.
Home builder Brookfield Homes Corp. of Del Mar, Calif., reported a 34% rise in its second-quarter profit thanks to gains from land sales.
The rise of mortgage rates and prices over the last few years has caught up with the U.S. housing market. The inventory of unsold lots and homes, both new and existing, has been building as prospective buyers no longer fear further price hikes.
"We say the market right now is weak," said Donald Tomnitz, Horton's chief executive, in a conference call with analysts.
"Every time we've gone into a downturn in the home building industry, they've always been longer and deeper than we've all imagined," he said. "We're preparing for the worst, and we think this one will be longer and deeper than just the last six months."
In its fiscal third quarter ended June 30, Fort Worth-based Horton reported a profit of $292.8 million, or 93 cents a share, down from $371.7 million, or $1.17, a year earlier.
Horton shares fell 85 cents to $20. Other home builder stocks also fell.
Last week the company said it expected third-quarter profit of 93 cents a share, well below the $1.30 analysts had forecast. The profit includes write-offs of 11 cents a share.
New orders for the quarter fell 4.4% and the cancellation rate reached 29%, up from 20% in the first quarter and 23% in the second. Cancellations were highest in last year's hottest markets: California, Florida and Las Vegas.
Horton repeated its forecast for fiscal 2006 of at least $3.65 a share, down from $4.25 to $5.35.
Brookfield said its profit rose to $43 million, or $1.57 a share, from $32 million, or $1.03, a year earlier. Land sales contributed $11 million, or 40 cents a share, to quarterly earnings, the company said.
Brookfield lowered its 2006 earnings outlook to $6.20 to $7.20 a share on slower home sales.
"After benefiting in 2005 from increases in home prices, in 2006 we are experiencing the impact of the long-anticipated slowdown in housing markets, particularly in the San Diego and Washington, D.C., area," Brookfield CEO Ian Cockwell said in a statement.
The company also said its board approved an increase in its stock-buyback plan to $50 million.
Brookfield shares fell 61 cents to $24.50.