Ryland Group Inc., the biggest home builder for first-time buyers, said Wednesday that fourth-quarter profit fell 46% on weak demand for homes and on costs to write down the value of its property and write off land options.
Net income declined to $87.2 million, or $1.98 a share, from $162 million, or $3.32, a year earlier, Calabasas-based Ryland said. Revenue fell 11% to $1.35 billion from $1.53 billion a year earlier. The company also incurred $54 million in costs to write down the value of land and walk away from options on land.
Earnings at Ryland and other home builders have fallen over the last year as they face the biggest housing slump in 15 years. Companies are offering enticements, such as making mortgage payments and installing granite countertops, to reduce the number of unsold homes, and that has reduced profit.
"You still have a lot of sales incentives for homes, which hurts the selling price," Tom Smith, an equity analyst at Standard & Poor's in New York, said before the earnings release. That may begin to change this year, he said. "The sales-incentive picture may not get much worse."
Analysts surveyed by Bloomberg estimated a fourth-quarter profit of $2.07 a share.
Ryland forecast earnings of $3.75 to $4.25 a share this year. Analysts surveyed by Bloomberg estimated a profit of $4.72 a share for the full year.
Home sales fell 16% in the quarter to 4,347. The average price for sold homes rose 4% to $298,000. New orders plunged 44% to 3,066 in the quarter.
Ryland said gross profit margins averaged 17.8% in the fourth quarter, down from 26.3% a year earlier.
The value of the company's backlog, or the number of units it has under contract and not yet sold, was $1.3 billion, down 51% from a year earlier.
Ryland incurred $42.8 million in costs to write down the value of its property inventory and $11.6 million to write off deposits it had on land it will no longer use because of the weakness in the housing market.
Shares of Ryland rose 57 cents to $55.97 before the release of earnings. The shares are down 25% over the last year, compared with a drop of 21% for the Standard & Poor's supercomposite home building index of 16 companies.