Housing's river of red ink

Orleans Homebuilders Inc. yesterday reported a hefty loss for its third quarter, with orders for new homes down 40 percent and contract cancellations at a rate of 31 percent.

The Bensalem company said it lost $55.7 million, or $3.01 a share, for the three months ended March 31 compared with a loss of $51.9 million, or $2.81 in the year-ago period.

Revenue in this year's quarter was $113.3 million compared with $146 million in the same quarter last year. However, the average selling price was higher for the latest quarter, $449,000, compared with $424,000 in the year-ago period.

"We do have a game plan for our future," chairman and chief executive Jeffrey P. Orleans said on a conference call with investors. "We have significantly improved our balance sheet. In the last few quarters, we have increased our liquidity and improved our capital structure and reduced our inventory levels."

Its inventory of lots it owned or controlled was at 8,242 as of March 31 compared with 11,850 a year before.

Orleans said new orders fell to $121.2 million, or 266 homes, compared with $201.1 million, or 437 homes, in the third quarter last year.

The company saw its cancellation rate - buyers who back away from signed contracts before closing on the homes - soar to 31 percent from 20 percent a year earlier. The largest increase in cancellations was in Florida.

Residential-property revenue dropped 15 percent to $109 million compared with $128.9 million in the same quarter last year.

The company said that buyer confidence was extremely low this winter. Mortgages were at a standstill, and cancellation of new homes "spiked up much higher than we had ever seen," it said.

To improve its balance sheet, the builder repaid bank debt, shed some "noncore assets," and reduced employment since June 2006 by 46 percent, including a 14 percent reduction in January. The homebuilder had 975 employees in June 2006 and currently has 530.

Nearly 90 percent of the company's third-quarter revenue came from its northern and southern regions, where homebuilding revenue was down only 1.5 percent. In contrast, revenue in the Midwest and Florida was down 61.7 percent.

Residential sales in parts of Pennsylvania, New Jersey and New York increased 15 percent in the quarter, compared with the year-ago period, the company said.

Orleans operates in Southeastern Pennsylvania; central and southern New Jersey; Orange County, N.Y.; Charlotte, Raleigh and Greensboro, N.C., and adjacent South Carolina counties; Richmond and Tidewater, Va.; Chicago; and Orlando, Fla.

"We've made lots of progress here," Orleans said. "Our liquidity is way higher. We have paid down our bank group. We have 90-some jobs under way. We are cautiously optimistic that the next 12 months" will be better.

Shares closed down 7.7 percent, or 36 cents, to $4.34.