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Pulte Posts Quarter Loss, Meritage Earns a Profit

Pulte Homes, the second-largest U.S. home builder, on Wednesday posted a quarterly net loss, chiefly because of charges related to impairments and the lower value of land in the sagging U.S. housing market.

Ryland Group also reported a net loss and its shares fell 2% in after-hours trading. However, Meritage Homes shares soared in after-hours trading after it reported a profit and said it saw signs the market was stabilizing.

The key to their outlooks was the old real estate adage of location, said JMP Securities analyst Jim Wilson. "The relative market strength -- first of all in Texas, and secondly, Arizona -- relative to most of the other public builders is a benefit to Meritage in the sense that those are markets that haven't been slashing prices as much or, in Texas' case, at all, and prices are still going up," Wilson said.

Pulte reported a first-quarter loss of $85.7 million, or 33 cents per share, better than the loss of 34 cents to 38 cents per share the company predicted in
an announcement last week.

A year ago, Pulte posted a profit of $262.6 million, or $1.01 per share. The first-quarter 2007 loss included $132.1 million for impairments and land-related charges.

Total revenue fell 37% to $1.9 billion. Home-building revenue fell 38% to $1.8 billion. The average selling price of a home fell 2% to $330,000.

Potential buyers canceled their orders at a rate of 24%, down from the 35% seen in the first quarter 2006.

"Nothing looks different from when they pre-announced," Wilson said. "(The earnings information) doesn't tell you much or anything incremental about where the market conditions are headed or whether Pulte has any different view than (D.R) Horton or Lennar," Wilson said, referring to the other top three builders who have reported weak results and little reason for optimism.

Looking ahead, the company said it expected to post 2007 earnings of break-even to a loss of 10 cents per share, exclusive of land related charges. However, because of "difficult market conditions that exist today," the company said it could not provide a forecast for the full year.

U.S. home builders have been struggling with a glut of homes on the market, lower prices and stalled demand. Many executives said they did not expect 2007 to provide the light at the end of the tunnel of the eroding market.

On Wednesday the U.S. Commerce Department reported that sales of new homes rose 2.6% in March from February, falling short of analysts' expectations. Meanwhile, the median sales price rose less than 1% from the prior month.

The inventory of new homes slipped to 7.8 months at current sales rates from 8.1 months. To weather the downturn, home builders have been shoring up their balance sheets, paring down the debt they carry, Pulte said.

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