M.D.C. Holdings, Inc., Denver (NYSE: MDC) on Tuesday reported a net loss for the first quarter of $19.9 million, ($0.43) per share, down slightly from a net loss of $20.9 million, ($0.45) per share in the prior-year quarter. The results were in line with Wall Street expectations of a loss of 44 cents per share.

There were no significant charges to earnings.

Revenue for the quarter rose 15.4% to $169.7 million as closings increased 6% to 554 homes with an average selling price of $294,900, up 9% from the prior year quarter.

New orders fell 24.3% to 705 homes with an estimated sales value of $205 million, down from $258 million during the same period in 2010. The average new order price rose 5% to $290,800. The cancellation rate jumped to 32% from 22% during the first quarter of 2010.

The company ended the quarter with 993 homes under contract with an estimated sales value of $312 million, down from 1,234 homes with an estimated sales value of $381 million at March 31, 2010.

Community count rose to 162 at quarter's end from 148 at the close of 2010 and 132 at the end of last year's first quarter. Lot count was up to 12,459(8,707 owned, 3,752 controlled) from 12,194 (8.035 owned, 4,159 controlled) at the end of the 2010 fourth quarter and 9,730 (6,349 owned, 3,381controlled) at the end of last year's first quarter.

Home gross margin dropped to 13.7% in the quarter from 22.4% in the 2010 first quarter. SG&A was flat with last year's quarter at $52.3 million, but the G&A component fell to #35.7 million on lower legal and compenstation costs from $40.2 million while the sales costs rose to $15.6 million from $12.2 million, primarily due to the increase in community count, the company said. As a percentage of revenue, SG&A was 29.4%, down from 34.3% in last year's quarter.

M.D.C. ended the quarter with $1.46 billion in home building cash and marketable securities, down from $1.54 billion at yearend 2010.

"Our home gross margins have come under pressure over the past few quarters for several reasons," said Larry A. Mizel, M.D.C. chairman and CEO. "First, our land costs have increased significantly, as the market for acquiring finished residential lots in prime locations has been very competitive, despite the continuing overall weakness in the market for new homes. ... Second, we have accepted lower gross margins to reduce our excess supply of unsold units under construction. Given that our land costs have returned to a level consistent with our historical average and we have substantially reduced our unsold inventory, we believe we have an opportunity to stabilize our home gross margins near current levels, if demand does not deteriorate further."

Mizel also said gross margins in newer projects, which accounted for more than 50% of closings, exceeded the home gross margins we achieved in older projects but did not elaborate.

Stephen East, home building analyst at Ticonderoga Securities, found little to like in the earnings report. In a reserach note, he wrote, "Despite 23% community growth (in line with expectations), orders were down 24% to 705 units. The cancellation rate spiked significantly to 32% versus 22% last year, making us wonder whether MDC has pushed pricing too far. ... Orders may come back with the community growth, but the margin is likely not coming back for at least a few quarters. We believe the equity should be down usefully today, as it will be hard for management to spin this in a positive way."

Shares of M.D.C. were trading down 3.5% Tuesday morning at $26.45.