D.R. Horton Reports

D.R. Horton reported their earnings today. What follows is part of the press release that accompanied those earnings.

D.R. Horton, Inc., the largest homebuilder in the United States, on Tuesday (October 10, 2006), reported net sales orders for the fourth quarter ended September 30, 2006 of 10,430 homes ($2.5 billion), compared to 13,950 homes ($3.8 billion) for the same quarter of fiscal year 2005. Net sales orders for fiscal year 2006 totaled 51,980 homes ($13.9 billion), compared to 53,232 homes ($14.6 billion) for fiscal year 2005. The Company's cancellation rate (homes cancelled divided by gross homes sold) for the fourth quarter of fiscal year 2006 was 40%, compared to 29% in the third quarter of fiscal year 2006.

This is evidence that the housing market is in a slow down, but looking at the relatively tame drops in net sales orders, there is hope that the bubble is deflating rather than popping in the housing market.

What is troubling though is the rather large jump in is cancellations. This is certainly troubling, but it remains to be seen whether this is just a one time thing for this quarter, in which many people came to the conclusion that the housing market is no longer as profitable as it once was. It should be interesting to see this cancellation number from both other builders for this quarter and from D.R. Horton next quarter.