NVR's Profits Slide On Housing Slowdown
By Alejandro Lazo
Reston-based homebuilder NVR said its profit fell 60 percent in the third quarter as orders for new homes declined and fewer mortgage loans were made in the midst of the slumping housing market and ongoing financial crisis.
The company said its net income for the third quarter ended Sept. 30 was $36.6 million, or $6.12 per diluted share, compared to net income of $91.1 million, or $15.26 per diluted share, for the third quarter of 2007.
Sales also declined 27 percent totaling $939.2 million in the third quarter from $1.3 billion for the comparable period one year ago.
"Operating unit activity and financial performance are being negatively impacted by high levels of new and existing home inventories, affordability issues, a tight mortgage lending environment and declining homebuyer confidence," the company said in a statement.
NVR said new home orders decreased 25 percent to 2,002 units in the third quarter compared to 2,660 units in the third quarter of 2007. Settlements decreased in the third quarter, to 2,750 units, 21 percent less than the third quarter of 2007.
The company's backlog of homes sold, but not settled, at the end of the third quarter decreased 35 percent to 4,583 units and 44 percent on a dollar basis to $1.5 billion when compared to the same period last year.
Gross profit margins took a hit from writing down the value of land deposits by about $43 million in the third quarter compared to $97 million in the third quarter of 2007. The company does not buy land outright, but rather options to buy land, a relatively conservative approach to land acquisition that has saved it from some of the big losses its homebuilding peers have seen.
Operating income from the company's mortgage banking operations during the third quarter decreased 76 percent to $4 million, when compared to $16.8 million reported for the same period of 2007. The company canceled a plan to raise $325 million in bonds as credit markets froze in September.
NVR's shares rose 1.18 percent in early morning trading to $559.53 at 9:53 a.m.
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