NVR Profit Slumps on Falling Orders for New Homes
Local builder NVR said its fourth quarter profit tumbled 50 percent as tighter lending standards prompted more home buyers to back out of contracts. See the company's news release.
The Reston company said it earned $67.3 million ($11.72 a share) in the period ended Dec. 31, down from $135.2 million ($20.86) in the corresponding quarter last year. The results included a $97 million charge ($10.32) to write down the value of its land holdings.
Including the charge, NVR's results fell short of the $16.63 per-share earnings that analysts polled by Thomson Financial had expected. The company said sales fell to $1.41 billion from $1.6 billion.
NVR, the nation's 10th-largest homebuilder, does most of its business in the Washington region. Like many builders around the country, NVR has struggled as prices and consumer demand have fallen amid the housing downturn and mortgage market meltdown.
Orders for new homes fell 35 percent, to 1,948 units from 3,002 a year ago. NVR blamed the slump in orders on instability in the mortgage market, which has made it tougher for home buyers to secure a loan.
"These sizable declines in new order units and prices will continue to have a significant negative impact on revenues and gross margins in the coming quarters," the company said, warning that the near future does not promise a quick turnaround.
Its cancellation rate on new homes jumped to 32 percent from 20 percent a year ago. In the Washington region, the cancellation rate rose to 46 percent, from 34 percent a year ago, the company said.
For all of 2007, the company's profit dropped 43 percent, to $334 million ($54.14). Revenue fell 16 percent, to $5.13 billion.
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