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2 home builders report declines in sales orders

January 10, 2007|From the Associated Press

D.R. Horton Inc., one of the nation's largest home builders, said Tuesday that its late-2006 sales orders fell 28%, dampening sentiment that the housing sector may be recovering from a slump.

The news was even worse from another builder, Meritage Homes Corp., which said net sales orders fell 42% and cancellations hit a record 48% in the fourth quarter.

Housing contracts and sales of new homes have been falling for about a year after the industry enjoyed an unprecedented five-year boom. Economists and analysts are split about whether the housing market has bottomed. Each camp can cite economic statistics to support its view.

Fort Worth-based D.R. Horton said it received orders for 8,771 homes worth $2.29 billion in the last three months of the year, compared with orders for 11,463 homes worth $3.17 billion a year earlier. Meritage, based in Scottsdale, Ariz., said net sales in the quarter were 1,201 homes totaling $356 million, down from a record 2,072 orders for $723 million a year earlier.

But Horton also provided a glimmer of hope for those who believe housing is recovering, saying its cancellation rate -- the number of orders canceled divided by gross sales orders -- fell to 33% in the last three months of 2006 from 40% in the July-to-September quarter.

Still, that's about twice the company's typical cancellation rate in the high teens, and Chairman Donald R. Horton said the company was forced to offer buyer incentives in many areas of the country.

Daniel Oppenheim, an analyst for Bank of America Securities, said the company appeared to suffer fewer last-minute cancellations, indicating it was more flexible in working with buyers who planned to back out.

Margaret Whelan, an analyst for UBS, said the decline in the cancellation rate indicated that the housing market was stabilizing and buyers were increasingly confident. She predicted that price declines would slow over the coming months.

Shares of Horton rose 8 cents to $25.47, and Meritage shares fell 8 cents to $43.34.

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