NVR Ekes Out a Profit In Deep Housing Slump
NVR's profit of $51.3 million reflected a skid of 43 percent.
(By Tracy A. Woodward -- The Washington Post)
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Wednesday, July 23, 2008
NVR, the region's biggest home builder, said yesterday that it is continuing to be hit hard by the housing bust, reporting that profit slid 43 percent in the second quarter and orders for new homes fell.
The Reston company said in a statement that its financials "continue to be negatively impacted by high levels of new and existing home inventories, affordability issues, a more restrictive mortgage lending environment and declining home buyer confidence."
NVR still posted a profit of $51.3 million ($8.64 per share), a contrast with many home builders, which have been reporting major losses this year. NVR earned $90.7 million ($14.14) in the second quarter a year ago. Revenue dropped 27 percent to $955.7 million.
The company's shares closed up $75.22, 15 percent, at $578.40 yesterday.
"This is one of the worst home building periods we have had. Positive earnings is unusual for the industry. The fact that they have positive earnings is good," said Gary Gordon, a managing director of research company Portales Partners.
Gordon said NVR has been helped by its policy of putting a down payment on land but not buying it outright until it is ready to build. "They haven't had to write down the value of land like a lot of home builders," he said.
NVR operates in 11 states and sells most of its homes in the Washington region, which has not been as battered by the housing crisis as places where other home builders have been active, such as California and Florida.
NVR said new-home orders in the second quarter declined 29 percent, to 2,670, and new-home cancellations rose.
In the mid-Atlantic, which includes the District, Virginia, West Virginia, Maryland and Delaware, new orders declined to 1,341 from 1,803. The company's backlog -- homes it has a contract to build but hasn't broken ground for -- has been cut sharply, both nationally and locally, suggesting lower profit and revenue in the coming year.
Daniel Oppenheim, an analyst at Credit Suisse, said there is enough housing still being bought and sold in the Washington region to benefit the company.
"We continue to see reasonable traffic in the D.C. market, a positive for NVR," he wrote in a research note.
NVR's mortgage lending unit also suffered, making only $593.9 million in loans, 30 percent less than in 2007. Profit in that unit declined to $7.2 million from $11.7 million in the second quarter of 2007.
