Ashton Wood Homes, the industry's 37th-largest builder last year, reported yesterday that its orders, closings, and net income were hit hard during the three months ended August 31, which is the first quarter of this builder's 2008 fiscal year.
The builder, which operates in seven markets in five states, lost $10.6 million on revenue of $97.4 million, which was down 34.7 percent from the same period a year ago, when Ashton Woods reported a positive $11.5 million in earnings. Its closings for the quarter fell 32.2 percent to 361 units, and new-home orders were off 28.1 percent to 259. Closings fell heaviest in Ashton Woods' headquarters market of Atlanta (by 51.3 percent), and orders declined steepest in Dallas and Houston (52.1 percent and 51.2 percent, respectively). Two bright spots were Tampa (where the company's 17 sales represented a 750 percent increase over the same quarter last year), and Phoenix (where orders rose 152.9 percent). The builder's overall backlog went down by 33.2 percent, to 719, and the value of that backlog fell 33.5 percent to $216.1 million.
Like many builders, Ashton Woods finds itself in a bind, where it can't sell homes without discounting, but where discounting only encourages buyers to think that lower prices are around the corner. "[T]he demand for new homes has declined as consumers continue to see home prices adjust downward, which has contributed to the weakening of consumer confidence," states Tom Krobat, Ashton Woods' CEO. During the quarter, the average sales price of this builder's homes fell 7.9 percent, to $270,000, with the biggest dip - 33.3 percent - in the Phoenix market, to $305,000. "Phoenix is one of the more depressed [housing] markets, with a tremendous price problem," Krobat told BUILDER during an interview earlier this month. Price discounting took its toll on Ashton Woods' quarterly gross margin, which plummeted to 5.7 percent of sales, versus 18.7 percent in the same quarter a year ago.
During its most recent quarter, the company reported $13.5 million in land impairments, about 2½ times the impairments in the same quarter in 2006. Bob Salomon, Ashton Woods' CFO, asserts that the 3.3 years worth of land that the company now owns or controls "is one of the most conservative in the industry." Salomon says the builder remains committed to sustaining a conservative balance sheet by "reducing our cost structure."
Ashton Woods' officials will discuss the company's financial results at a teleconference scheduled for 2 p.m. EST today.
Learn more about markets featured in this article: Atlanta, GA.