William Lyon Homes managed to narrow its losses in 2008 to $104 million, compared to $349.4 million in 2007, the company reported March 4.

Its quarterly loss, too, at $23.2 million, was a fraction of the $185.9 million the Newport Beach, Calif.-based company lost in the fourth quarter of 2007.

While it was able to narrow its losses, like most builders, it was unable to stop sales from eroding. Lyon closed 1,260 houses in 2008, a reduction of 42% over the 2,182 it closed in 2007.

New home orders for the year were 1,221, a decrease of 34% from the 1,855 it logged for the year ended Dec. 31, 2007.

Lyon was able to slow cancellation rates. They stood at 28% for 2008 compared with 23% in 2007.

As the company decreased prices and upped incentives to sell homes and changed its product mix, the average sales price fell 19% to $371,800 from $459,500.

In a corporate about-face, Lyon also went from being a C-corporation to an S-corporation and then back to a C in the space of a year. The move to an S-corp on Jan. 1, 2008, was done for tax purposes, and so was the move back to a C-corp on Jan. 1, 2009.

The move back to a C allowed it to receive a $41.6 million tax refund related to carrying the 2008 tax loss back to 2006 earnings, it reported in SEC documents. It has another $19.4 million of built-in losses remaining that it will be able to offset future income until 2010 and 2011.