Luxury homebuilder Ryland
The termites eating at Ryland were the falling values of homes, the need to write off land inventory, and charges for impairment of goodwill. Closings for the builder were off 35% in the quarter and it took in 26% fewer new orders. Backlog and the value of the properties in backlog were also down by nearly 50% from last year.
The housing sector is still resting on a wobbly foundation, trying to divine hope from the encouraging results at builders like Meritage
Meritage, although the 12th-largest builder in the U.S., concentrates its activities primarily in Southern and Western states. While it reported a greater than 80% plunge in profits, the Motley Fool Stock Advisor recommendation still managed to wow analysts with its results. It also saw its market improving.
That's in marked contrast to Ryland, which not only foresaw greater uncertainty in housing, but said it didn't think it could meet its prior forecasts for the year and pulled all guidance as a result. Instead, "the company is maintaining focus on its liquidity and balance sheet while optimizing its earnings performance." Ryland also has a mortgage finance unit which, while posting earnings of $8 million, noted it was off 30% from last year as the number of mortgages originated plummeted.
Perhaps Ryland can take some comfort in Meritage's results, since it has a base of operations in the same regions as its rival. Meritage is looking for stabilization if not growth from there, so at least a portion of Ryland's portfolio may see better results. Florida looks like it will be a problem area for any builder, but Texas and California may be able to provide the hammer and nails for a future rebuilding.
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