Home builders beware: Expect 2008 to be worse than 2007.

That's the latest word from D.R. Horton CEO Don Tomnitz, who believes that the wave of foreclosures that will hit the market in 2008 when a million-plus subprime mortgages readjust will make for a very tough year.

"There's no question that 2008 will be worse than 2007 for us," said Tomnitz, speaking to a group of analysts this morning at the JPMorgan Homebuilding and Building Products Conference in Las Vegas.

On a more positive note, Tomnitz said home builders have done a great job adjusting prices and cutting costs through the downturn, so most builders are in a very strong position when they go head-to-head against existing-home sellers.

"That's the rosy picture here," said Tomnitz. "We can offer a new product at a more competitive price," he concluded.

During his presentation, Tomnitz said by working off inventory, adjusting its start levels, reducing lot position, paring down debt, and cutting costs D.R. Horton will emerge from the downturn a stronger company.

Here are some of the highlights:

  • Fiscal year 2007 starts decreased 42 percent.
  • Home inventory decreased 50 percent from a June 2006 peak.
  • Lot position has decreased 42 percent from March 2006 peak.
  • Cash flow increased to $2.2 billion in latest 15 months ending September 2007.
  • Home builder debt is down $900 million in fiscal year 2007.
  • Sales, general, and administrative (SG&A) costs were cut $315 million.
  • Learn more about markets featured in this article: Las Vegas, NV.