NEW YORK (Reuters) - Home builder Meritage Homes Corp (MTH.N) posted a net loss for the fourth quarter on Monday compared with a year-earlier profit, in part because of lower sales and charges for lower land values reflecting the slumping U.S. housing market.
The U.S. housing market has been in a tailspin for more than two years, hounded by falling prices and evaporating demand.
On Monday, the U.S. Commerce Department said sales of new single-family homes in December plummeted a record 26 percent in 2007 and builders slashed prices by the most since 1970.
Sales in December fell 4.7 percent to an annual rate of 604,000, the slowest pace since 1995, from a downwardly revised rate of 634,000 in November.
"This has been the most difficult year we've experienced in homebuilding in more than 25 years, and we currently expect 2008 will also be challenging," Steven Hilton, Meritage's chairman and chief executive, said in a statement.
Meritage reported a fourth-quarter net loss of $128.8 million, or $4.91 per share, compared with a profit of $9.02 million, or 34 cents per share, in the year-earlier quarter.
The fourth quarter net loss included $130 million of pretax real estate-related and joint venture valuation adjustments and $58 million of pretax goodwill write-offs. It also incurred an $11 million noncash pretax charge for the acceleration of expenses related to the cancellation of employee stock options and a $3 million impairment of golf course assets held for sale.
The fourth quarter of 2006 included a pretax charge of $63 million for lower real estate values.
To combat the impact the deteriorating U.S. housing market has inflicted globally, the Federal Reserve last week slashed the benchmark federal funds target rate by 0.75 percentage points and the government is mulling mortgage rescue and economic stimulus plans.
In response to the deteriorating market, U.S. home builders have shifted their focus from profit and growth to survival, focusing on generating cash to pay off debt and getting rid of the excessive land and inventory they accumulated during the boom times.
During the quarter, Meritage reduced its inventory of homes built on speculation by 10 percent, cut its purchases under options by about $55 million, and acquired about 650 fewer lots than it did the prior quarter.
The company generated cash, reducing its bank debt by $153 million, to a balance of $82 million at December 31. The company has a target of reducing its credit facility debt to a zero balance by the third quarter, and then start accumulating cash reserves.
During the quarter, home closing revenue fell 25 percent to $615.6 million, due to an 18 percent decline in homes closed to 2,139, and a 9 percent decline in the average selling price of a home. Arizona had the largest decline in home closings, down 44 percent.
New orders fell 13 percent to 1,048 and the value of the orders were off 23 percent to $271.6 million.
Meritage, based in Scottsdale, Arizona, expects to receive $52 million of tax refunds in the first quarter, a result of carrying back its 2007 losses to recover taxes paid in 2005.
Meritage reflected the tax refund on its receivable balance. The company expects to trigger the realization of its $141 million deferred tax asset in 2008 and beyond.
Reporting by Ilaina Jonas, editing by Phil Berlowitz/Andre Grenon