Updated from 11:01 a.m. EDT

Homebuilders continue to cut their guidance amid a rapidly declining U.S. housing market, highlighted by growing inventories of homes for sale and increased cancellations from buyers.

In the past 24 hours,

KB Home

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and

Beazer Homes

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both slashed their full-year guidance, while

Hovnanian's

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earnings fell sharply from a year ago.

It's also worth noting that these companies are so uncertain about the future of the housing market that they have not yet issued guidance for 2007.

"What has made the slowdown surprising to builders is the broader economic background is still positive," with good job growth and low mortgage rates, Ara K. Hovnanian, the chief executive of Hovnanian, said on a conference call Thursday.

The problem, however, continues to be the lack of buyer confidence and a very large amount of supply.

One of the most shocking numbers from Hovnanian's earnings call was that the company's new orders fell 31% in the Western U.S., despite Hovnanian's community count increasing 24%.

Late Wednesday, KB Home cut its earnings guidance for the year to $8.00 to $8.50 per share, down from the previous guidance of $10 per share in June. Analysts currently expect $9.67.

KB Home also said preliminary numbers show a 43% drop in new orders for the third quarter, as cancellations rise and traffic declines at its communities.

Home Closings Down

Thursday morning, Beazer said it expects earnings of $8 to $8.50 a share for fiscal year 2006, down from its previous forecast of $9.25 to $9.75. The company will likely close a smaller number of homes in the fourth quarter than it previously projected, as net sales through the two months ended Aug. 31 dropped 49% from last year and cancellations of existing contracts rose to 50% from 26% a year ago.

On average, analysts surveyed by Thomson Financial were looking for EPS of $9.27 from Beazer for the fiscal year.

Compared with prior years, a higher percentage of home closings are being deferred or canceled, immediately prior to closing in many cases, due to declining buyer sentiment and the inability of buyers to sell their existing homes, Beazer said. The company added that its revised outlook also takes into account potential charges for getting out of nonstrategic land positions that are under review.

"We think that the fragmented nature of the business leads to excess supply as homebuilders will start new developments if the returns appear acceptable to that homebuilder even if the overall industry has far too much supply," Bank of America analyst Dan Oppenheim wrote in a research note.

"In addition, we believe that the competition to sell homes results in companies accepting smaller deposits during challenging times than in strong times, which is problematic given that the risk of cancellations is now much greater than in the past," Oppenheim wrote.

Meanwhile, Hovnanian said after the market close Wednesday that it earned $74.4 million, or $1.15 per share, in its fiscal third quarter, compared with $116.1 million, or $1.76 per share, a year earlier. Revenue increased 18% from a year ago to $1.6 billion. Analysts expected EPS of $1.10.

Walk-Away Costs

New contracts fell 19% to 3,349 units. Management reaffirmed its earnings projection for the fiscal year ending Oct. 31 of between $5.00 and $5.75 per share. Analysts expect $5.15.

"Our profits have been negatively impacted by the increased use of incentives and concessions, as well as expenses related to walking away from option deposits," Larry Sorsby, Hovnanian's chief financial officer, said in a statement.

"We incurred $11.4 million of charge-offs associated with walk-away costs and an additional $0.8 million in land write-downs in the third quarter. We continue to renegotiate a significant number of our land contracts, and are likely to incur additional walk-away costs in conjunction with some of these situations," he said.

Hovnanian shares, already trading 15% below book value, were recently up 4.6%, to $26.65. KB Home shares were up 0.5% to $40.60 after trading as low as $38.66 earlier, but Beazer was down 2.1% to $37.66.