Harkening back to 2002 when America's largest home builder posted 31,584 sales contracts, D.R. Horton's early reporting for fiscal 2007 underscores the fast and furious descent of housing's high-flying days.

Exceeding most analysts' estimates, fourth quarter orders fell 39% year-over-year to 6,374 homes worth $1.3 billion in the quarter ending Sept. 30. Net sales orders for the company's fiscal year 2007 totaled 33,687 homes ($8.2 billion), compared to 51,980 homes ($13.9 billion) for fiscal year 2006.

This is in spite of aggressive price cuts initiated in summer that the company hoped would be recognized in the fiscal year's final quarter. Year-over-year, Horton reported that average order price was also down 15% to $205,400. "The potentially most troubling information is that in a region such as California prices fell 38% yet unit orders still fell 58%, demonstrating to us that a clearing price has yet to be found and that the market is not necessarily showing price elasticity," notes Wachovia analyst Carl Reichardt.

"Market conditions for new-home sales declined in our September quarter as inventory levels of both new and existing homes remained high while pricing remained very competitive," says chairman Donald Horton. "We also experienced reduced mortgage availability due to tighter lending standards, and buyers continued to approach the home buying decision cautiously."

In an all-time record, the company's cancellation rate for the quarter reached 48%, up a full 10% over the previous quarter.

Despite the deteriorating conditions, the company did hit a high note. In a move to cut debt and inventory while generating cash, the company reduced the number of homes under construction in the quarter. That helped it achieve the goal to generate $1 billion in cash flow from operations for the fiscal year.

Horton gave no indication about possible impairments for the period, but considering that today's report indicates both orders and pricing are down, additional impairments seem likely. In July, Horton took nearly $1.28 billion in charges and posted its first-ever quarterly loss. Analysts are forecasting charges ranging from $540 million to $1.27 billion for this quarter.

During the fourth quarter, the Horton aligned its external reporting regions with changes in its internal reporting regions. The new Midwest region includes the following markets: Denver, Chicago, and Minneapolis. Denver was previously reported in the Southwest region, while Chicago and Minneapolis were previously reported in the Northeast region.

The company will release its fourth quarter results on Nov. 20, 2007.