Tracking the US Housing meltdown

As mentioned in a post last week US homebuilder D.R. Horton Inc (DHI) said sales orders had slumped 37% from a year ago for the quarter ended March 31st 2007. Yesterday the company announced an 85% drop in profit to go along with the slump in sales for the quarter. And whilst some are still hoping for a rebound in sales for the Spring selling season D.H. Horton Chief Exceutive Donald Tomnitz doesn't sound so optimistic stating:

"We're still faced with a liquidity crisis in the mortgage industry and I think that's going to get worse over the next two to three quarters as opposed to better,"

The company also announced that they had cut just over 25% of their workforce from last spring.

Also this week another large US homebuilder, Pulte Homes Inc. (PHM) announced that new orders fell 21% in 1Q07 from a year ago and expected their net loss to be in the range of 34 - 38 cents per share, a lot worse than their previous estimate of between break-even to a loss of 10 cents a share.

From the evidence so far 1Q07 earnings are meeting or slightly bettering expectations of around 7.5% growth across the S&P 500 universe of stocks and whilst it represents a significant slowing in earnings from the previous 13 quaters of double digit growth it is by no means disastrous. However it is a little early to guage the full effect of the mortgage lenders and homebulders on other sectors but expect the earnings infection to spread as the year progresses.