Two of the nation's largest home builders reported quarterly financial results that were weaker than the year before, showing that the industry continues struggling to sell homes as the housing crisis drags through its fifth year.
The pre-market results from PulteGroup Inc. (PHM) and DR Horton (DHI) continue a bleak earnings season for the battered sector. Wednesday, Ryland Group Inc. (RYL) reported a second-quarter loss. Last week, NVR. Inc. (NVR), long the sector's top performer because it made money during the downturn, said that it saw profits slashed by nearly half when compared to a year earlier.
Home sales typically pick up in the spring, as buyers emerge from their winter lulls and rush to move before the new school year starts. But this year's season was a dud. Both Pulte and Horton saw closings fall, while orders didn't spike, which weighed on revenue.
The market continues to be hampered by high unemployment--the national rate now stands at 9.2%--and tight lending standards, which are preventing would-be buyers from securing mortgages. A fresh concern is the debt-ceiling debate, which some real-estate agents say has consumers abandoning or halting deals because they're worried borrowing costs are set to rise.
"What's going on in the economy as a whole and, maybe some of the chaos on Capitol Hill, is taking its toll on the confidence level of buyers," said Brad Hunter, chief economist with Metrostudy, a housing-research firm.
Earlier this week, the Census Bureau reported that new-home sales slipped in June from a month earlier to an annual rate of 312,000 units, putting the current sales pace below last year's total of 323,000, which was the lowest annual total on record.
The market for existing homes also remains weak. Economists surveyed by Dow Jones Newswires expect pending-home sales, due later Thursday, to slip 2%. Home values, already down dramatically from the peak, continue falling. According to the latest monthly Standard & Poor's Case-Shiller home price index, prices for homes in 20 major U.S. cities fell 4.5% in May from a year earlier. Compared with April, seasonally adjusted prices were virtually unchanged.
The current environment "reflects the magnitude of our pre-recession overbuilding and now we're on a decade-long path to try to right the market," said Paul D. Ballew, chief economist with Nationwide Mutual Insurance Company, a provider of homeowner insurance.
For the quarter ended June 30, Pulte, the nation's second-largest builder by annual closings, reported a loss of $55.4 million, or $0.15 a share, compared with net income of $76.3 million or $0.20, from a year earlier. Revenue fell to $927 million from $1.3 billion.
Analysts polled by Thomson Reuters had most recently forecast a loss of 4 cents on $988 million in revenue.
The results included $41 million, or $0.11 cents per share, of land, mortgage, organizational restructuring and debt repurchase charges. The reorganization should slash overhead expenses by $50 million annually, the Bloomfield Hills, Mich.-based company said.
Revenue from home sales decreased 29% from the prior year to $900 million, depressed by a 28% decrease in closings, which came in at 3,633, combined with a 1% decrease in average selling price to $248,000. The year-earlier comparison includes results from the government's home-buyer tax credit that expired last summer.
Orders totaled 4,222, consistent with the prior year, but down 3% from the first quarter.
The adjusted gross margin was 17.2%, up 30 basis points from the prior quarter.
The company ended the quarter with $1.2 billion in cash and expects to be profitable in the second half.
Sector giant DR Horton (DHI), meanwhile, reported a fiscal third quarter profit of $28.7 million, or $0.09 per share, down from $50.5 million or $0.16 per share a year earlier.
For the quarter ended June 30, revenue totaled $975.4 million, down from $1.4 billion a year earlier.
Analysts were calling for a gain of a nickel on revenue on $987 million.
The results included $9.9 million in land-related charges.
Closings totaled 4,555 homes, down from 6,805 homes a year earlier. Orders came in at 4,874, down from 4,921 a year ago.
"Market conditions in the home building industry are still challenging," Donald R. Horton, chairman of the Ft. Worth, Texas.-based company, said in the release. Still, "we are proud of the results our team achieved this quarter."
Shares of both companies were inactive in pre-market trading. In the last 12 months, shares of Pulte have fallen nearly 20%, while Horton is up about 9%.
-By Dawn Wotapka, Dow Jones Newswires; 212-416-2193; email@example.com
--Wesley Lowery contributed to this report