More public homebuilders are reporting declining quarterly sales on slowing demand, In another sign the U.S. housing market is cooling.
New home orders, excluding joint ventures, were down 13% from the year-ago period. The company blamed the decline on "the slowing of demand in some of our markets from the unsustainable pace of the past few years, a trend that we began to experience in the fourth quarter of last year," Standard Pacific Corp. late Monday said.
Standard Pacific said, that Slower activity is "particularly evident in markets which have experienced significant price increases and investor-driven demand in recent years, such as California and Florida."
Standard Pacific stock dropped 2.8% to $32.95 a share on Tuesday afternoon. Also after the closing bell Monday, troubled Dominion Homes Inc. said fourth-quarter sales were 230 homes, down from 392 homes the previous year. Additionally, the Irvine, Calif.-based firm said the year-to-date cancellation rate for the period ended Feb. 26 was 26%, up from 18% the prior year.
As a result, the company does not expect to be profitable for the first quarter. Dominion, which has seen its shares fall more than 50% over the past 12 months, said it is aggressively reducing its land position on lower demand and sales. The company focuses on first-time homebuyers in the Midwest and its restricted market has softened considerably. The Dublin, Ohio company said its 2005 year-end backlog was "the lowest in several years and reflects a slowdown in home sales that began during the second quarter of 2004 and continued throughout 2005."
Some other homebuilders also say they are increasing incentives to move inventory, Chief Executive Officer Douglas Borror said the company is offering "selective discounts" in an effort to bolster sales. Shares of Dominion slipped 1.1% to $9.65 Tuesday afternoon.
"The company believes its sales order results to date in 2006 reflect recent broader market trends toward a softening in demand for residential housing," Ryland said in the filing. Another homebuilder, Ryland Group Inc., in its 10-K filed Friday said in the first two months of the year it has experienced a decline in sales orders for new homes compared to last year.
In a research note Tuesday, analysts at Raymond James said they are anticipating a 10% decline in Ryland's unit orders for the first quarter. The company added that it may revise its outlook for 2006 if sales orders do not improve.
2006 results will be largely dependent on what the company sells from March to July, the peak selling season for most homebuilders, that is what Ryland Chairman R. Chad Dreier at the Wachovia Homebuilders Conference in Las Vegas said Tuesday.
See earlier story. On Tuesday, the National Association of Realtors said existing home sales slipped 2.8% in January. Shares of builder stocks lost ground earlier this week after the Commerce Department reported sales of new homes in the U.S. fell 5% in January to the lowest seasonally adjusted rate in a year. See earlier story.
By: Dijon Wainwright