Ryland, Pulte Continue to Struggle

By: PAUL JACKSON
October 22, 2008

Via MarketWatch:

[Ryland] took pretax charges of $60.4 million for inventory valuation adjustments. New orders dropped 31.6%. The company said its inventory of unsold homes stood at 719 units at the end of September, down 12.6% from the end of 2007…

(At Pulte) Net new home orders for the quarter totaled 3,008 homes, a 34% decline from the same period a year ago.

Both builders booked heavy losses for the quarter, as a result; a 30 percent drop in new home orders from one year ago is the key here — it’s not as if Oct. 2007 was all peaches and cream for the builders, after all. So bad got worse.

Not surprisingly, housing starts fell to their second-lowest level in 50 years, the Commerce Dept. estimated last week. Builders have been paring back on starts throughout the downturn, but have consistently lagged doing so relative to demand; that said, cutting back on an oversupply of vacant new homes and empty lots is one critical aspect of coming out of the current mess we’re in.

Of course, more than a few builders will fail and go bankrupt before we get there. So it’s not surprising to hear that the builders’ lobby is now actively pushing for an increased tax credit for new homes, reported to be as much as $20,000. When you’re against the ropes, you’ll try anything.

The $7,000 credit didn’t work, and I doubt $20,000 — should Congress be blind, deaf and dumb enough to actually consider it — will fare much better in saving troubled builders from the brink.

Note: no positions in any builders mentioned.