by Calculated Risk on 8/05/2008 11:26:00 AM

D.R. Horton reported this morning: D.R. Horton, Inc. Reports Fiscal 2008 Third Quarter Results. All the numbers are grim:

The quarterly results included $330.4 million in pre-tax charges to cost of sales for inventory impairments and write-offs of deposits and pre-acquisition costs related to land option contracts that the Company does not intend to pursue ... Homes closed in the current quarter totaled 6,167, compared to 9,643 homes closed in the year ago quarter.

Horton also reported that their cancellation rate increased to 39% in fiscal Q3 (calendar Q2 as shown on graph).

Click on graph for larger image in new window.

Declining cancellation rates was one of the few pieces of good news for homebuilders recently.

This graph shows that cancellation rates had started to decline from the peak in Q3 2007 (the start of the credit crunch). Cancellations rates vary between builders because of different requirements when the contract is signed (some builders put more effort into qualifying borrowers and require larger downpayments than others).

For Horton, their normal cancellation rate is 16% to 20%. An increase to 39% is bad news.