Published April 12, 2007

Major US home builder hit by slump in orders

Company's problems reflect a wider downturn in market

(WASHINGTON) The subsidence plaguing the foundations of the US housing market deepened on Tuesday as America's biggest homebuilder, DR Horton Inc, reported a hefty 37 per cent slump in new home orders.

DR Horton is a key bellwether for the US housing industry: It erected tens of thousands of new homes across the country last year and markets luxurious properties, town homes and apartments priced from US$90,000 to over US$900,000.

The company's woes, however, reflect a wider downturn in the US housing market which slowed markedly last year following a multi-year boom which saw prices and construction projects rocket.

DR Horton's gloomy update comes after a flurry of rival homebuilders have reported losses in recent weeks, and days after mortgage lender New Century Financial Corp, announced it was seeking bankruptcy protection.

Concerns about the housing downturn and forecasts suggesting over two million Americans could lose their properties to foreclosure in the next couple of years have sparked alarm among congressional lawmakers.

DR Horton said net sales orders for the last quarter slumped 37 per cent to 9,983 new properties compared with the same quarter of 2006.

The homebuilder also reported a 32 per cent cancellation rate for the quarter ended March 31, saying cancellations, however, were little changed from the prior quarter.

'Market conditions for new home sales continue to be challenging in most of our markets as inventory levels of both new and existing homes remain high,' said DR Horton's chairman Donald Horton.

Although the housing downturn has acted as a drag on the world's largest economy, most economists believe it will not pitch the US into a recession although economic growth has cooled in the past year.

The International Monetary Fund (IMF) cautioned in a report last Thursday that the US housing slowdown has yet to notably spill over into other sectors of the economy.

However, it warned that if a spillover did occur, it could affect other economies as well as growth in the US. - AFP