Home builder NVR Inc. reported yesterday that new orders in the Washington area fell almost 19 percent in the third quarter from a year earlier, adding to evidence that the region's booming housing market may be cooling off.
In reporting earnings for the three months ended Sept. 30, the Reston company that is the area's biggest home builder said new orders increased "in each region, except Washington, D.C., which was negatively impacted by generally weaker market conditions."
NVR's stock fell 10.3 percent after the company's results fell short of Wall Street expectations, though revenue for the quarter was up 18 percent and profit was up 28 percent. Shares closed at $680, down $77.75. Stock of other home builders also fell after the announcement. NVR spokesman Dan Malzahn could not be reached for comment.
The drop in new home orders in the Washington area -- to 622 in the recent quarter from 766 a year earlier -- contrasted with an overall increase of 7 percent for NVR's markets in 11 states along the East Coast.
"We've seen a little air come out of the D.C. balloon," said David A. Lereah, chief economist for the National Association of Realtors. As interest rates have climbed and supply has increased, Lereah said sellers have not yet adjusted their prices for increasingly cautious buyers.
Analysts said the market's slowdown appears to be hitting higher-end home sales so far. "It looks as if the luxury home market has softened -- inventories are a little higher, and there's not as much sales in the higher price points," said Kenneth Wenhold, director of the Washington region for Metrostudy, a national real estate advisory firm.
But analysts cautioned against reading too much into NVR's statement. "In short, while NVR's results at first cut might not have looked all that good, they were not horrible, and we think this morning's sell-off in builders' stock is way overdone," Gregory E. Gieber, an analyst with A.G. Edwards & Sons Inc., wrote in a report yesterday.
He added that "new home prices got ahead of themselves" in the Washington area and probably could not be sustained.
NVR shareholders have benefited from the housing boom -- its share price has more than tripled since 2002. The entire home-building sector has thrived, only to be set back by any hint of weakness.
Among other major home builders, KB Home lost $2.09, or 3.2 percent, to close yesterday at $62.34. Pulte Homes fell $1.83, or 4.9 percent, to $35.18. Most publicly held home builders have yet to report earnings.
The area's long housing boom resulted in homes selling within a day of going on the market and prices that about doubled in four years in many of Washington's close-in suburbs. But by this summer, there were signs that the frenzy was easing -- homes stayed on the market longer and the number of homes for sale increased.
Despite the results NVR released yesterday, other area builders said the market's fundamentals remain strong.
"We do have a couple communities that are slower than normal, but we're very pleased overall," said John Monacci, vice president of operations for Winchester Homes Inc.
"We see strong demand in the market continuing. Just think of all the jobs being added to this market," said Christopher Clemente, chairman and chief executive of Comstock Homebuilding Cos.
"The way we're looking at it is it's just an adjustment," said Calli Schmidt, a spokeswoman for the Northern Virginia Building Industry Association. "It's back to normal. It's not crazed like it was during the last three years."
NVR reported a third-quarter profit of $189.4 million ($24.33 a share), compared with $147.7 million ($19.04) in the comparable period a year earlier. Home-building revenue was $1.35 billion, up from $1.15 billion.
The company also reported a 14 percent increase in its housing backlog, to 8,875 units, with the dollar value of those homes totaling $3.83 billion, a 30 percent increase from a year earlier.
NVR's brand names include Ryan Homes, NVHomes and Fox Ridge Homes.