D.R. Horton CEO Donald Tomnitz continued his straight shooting with the financial community today when he told analysts and reporters during an earnings briefing this morning that a housing recovery was a long way off.
"We're not projecting when there will be a recovery because we don't see one on the horizon," said Tomnitz.
"It is now clear that the selling season did not materialize this year and our disappointing sales results and elevated cancellations [of 38 percent for the quarter] have caused us to have an increasingly cautious outlook," said Horton's CEO, who much like the other public big builders, tried to put the best face on an increasingly grim market.
D.R. Horton reported a net loss for its third fiscal quarter ending June 30 of $823.9 million, or $2.62 per share. The quarterly results included pre-tax charges of $835.8 million for inventory impairments and $16.2 million for writeoffs of deposits and pre-acquisition costs related to land options contracts the company does not intend to pursue. The results also included a pre-tax goodwill impairment of $425.6 million.
Home building revenue for Horton's third quarter of fiscal 2007 totaled $2.5 billion, compared to $3.6 billion in the same quarter of fiscal 2006. Horton closed 9,643 homes in the current quarter, compared to 13,377 homes closed in the same quarter a year ago.
Tomnitz said the Arizona and Texas markets were still in good shape and the Northeast was much improved, but Horton continues to struggle in California. He also said the builder has finally reached "equilibrium" in the Florida market. Tomnitz noted that the affordability issue had become a major problem in California, where only about 10 percent of potential buyers can afford a median priced home. A recent report by the California Homebuilding Foundation estimated the cost of a median priced home in the state to be $576,360.
On a positive note, Tomnitz said the builder expects to reach its $1 billion positive cash flow goal for this fiscal year. The CEO said Horton was focused on cutting its materials and labor costs between 5- and 10 percent, which represents roughly 70 percent of its total costs.