Reston Builder NVR Posts A Profit
Land Options Cited As Winning Strategy
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Wednesday, January 30, 2008; Page D04
In an industry bleeding money, home builder NVR of Reston yesterday bucked the trend by reporting a profit.
The publicly traded builder, which also operates a mortgage bank, posted a $67.3 million profit ($11.72 a share) for the fourth quarter. That was down 50 percent from the fourth quarter of 2006, when profit was $135.2 million ($20.86). The company builds under the names Ryan Homes, NV Homes, FoxRidge Homes and Rymarc Homes.
NVR blamed much of the drop on a 35 percent fall in new-home orders and on its write-down of $97 million in deposits on optioned land from which it has walked away.
The company's customers were also walking away from their contracts as the mortgage market tightened in the quarter. The order-cancellation rate for home buyers in the fourth quarter was 32 percent, compared with 20 percent in the fourth quarter of 2006. In the Washington area, the cancellation rate rose to 46 percent, up from 34 percent a year earlier.
"New order activity slowed as the quarter progressed and activity has remained weak during January," the company said in a statement.
David Zelman, president of Zelman and Associates, a research firm in New York, said NVR has had success in the down market by building to order and optioning most of its land rather buying it.
That strategy, he said, has "proven through the down cycle why it makes sense."
For the year, NVR earned $334 million ($54.14), down 43 percent, from $587.4 million ($88.05), in 2006. The company's stock rose 4 percent in New York Stock Exchange trading, closing at $627.65.
NVR's report came on the same day that Tousa, a Hollywood, Fla., builder, became the biggest publicly traded builder in this downturn to file for bankruptcy-court protection. In the D.C. area, Tousa operates as Engle Homes.
