Shares of Comstock Homebuilding ( CHCI) tumbled nearly 10% Tuesday after the company reduced its earnings projection for 2005 and said it would write down some of its inventory in the Raleigh, N.C., market.

The small-cap builder, which mainly constructs new houses and town homes in Washington, D.C., and North Carolina, had already lowered its full-year earnings guidance in early December. The company's latest estimate is for fourth-quarter earnings of 65 cents a share, down from the previous forecast of $1.01 to $1.10. Analysts, on average, predicted earnings per share of $1, according to Thomson First Call.

For 2005, Comstock expects earnings of $2.12 a share, down from its lowered December guidance of $2.50 to $2.60. Analysts were expecting earnings of $2.50 a share.

Comstock shares were down $1.25, or 9.7%, to $11.62 in recent trading. The shares hit a 52-week low of $11.27 earlier in the day. The shares previously were at a 52-week low of $12.37 on Jan. 24, compared with a 52-week high of $31 last Feb. 28.

The Reston, Va., company, which will release its earnings in late February, also reported a 7% drop in net new orders for the fourth quarter, blaming a slowing Washington, D.C., market for the decline.

Comstock said its reduced earnings estimate includes an impairment charge on certain housing inventory in its Raleigh operations. It's not clear if the writedown is for communities open for sale or simply owned land on the company's books. It's also not clear how much the impairment charge contributed to the lowered earnings forecast, since no dollar value was given for the impairment.

The company's management wasn't immediately available for more information.

"The rate of home price appreciation in the Washington, D.C., market during the past few years led to pricing resistance which negatively impacted new order rates in the region in the fourth quarter," Christopher Clemente, the company's CEO, said in a statement.

Clemente also said that cancellations by buyers who were looking for houses as investments hurt results.

"We believe the strong demand caused by the tremendous job growth in the Washington, D.C., area, the absence of investors from the market, and a slower, more sustainable rate of appreciation, will lead to better balance in the market," Clemente said.

The company said it is focusing on geographic expansion into additional growth markets throughout the mid-Atlantic and Southeast. Earlier this month, Comstock bought Parker Chandler Homes, which has operations in Georgia and the Carolinas.

"We believe that our strong backlog of sold units, our land position in multiple markets, and our overall focus on moderately priced products provides a solid foundation for continued healthy year over year growth in 2006 and beyond," Clemente said in the statement.

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