Home Builders See Grim Road Ahead

New York, NY, June 4, 2008--Homebuilder D.R. Horton said Tuesday the industry could face difficult conditions until 2010.

"I believe the industry will continue to face rising pressures for certainly the next 12 to 18 months," said Don Tomnitz, D.R. Horton's president and chief executive, adding that "2010 will be the earliest we get a more solid homebuilding environment."

Homebuilders are struggling to sell their homes because many buyers are reluctant to enter the market because they expect home prices to keep falling. Manu builders have been forced to increase incentives and discounts, shrinking their profits.

Tomnitz said home prices may still have more to drop in many of the hardest-hit markets, like Florida, California, Las Vegas and Arizona.

"But, clearly, to me we've come down more than we're going to have to come down on a going forward basis," he said at the 3rd Annual Basics and Industrials Conference.

When order cancellation rates begin to fall, Tomnitz said, that will be an indication of improvement in the market.

Builders are writing down the value of thousands of acres of land purchased during the housing boom that is now worth less than they paid.

The top 11 homebuilders took a combined $22.9 billion in impairment charges between the third quarter of 2006 and the first quarter of this year, according to JPMorgan.