Updated from 9:02 a.m. EDTRyland Group ( RYL) reported a 9% drop in second-quarter earnings, and the homebuilder cut its full-year guidance because of the continued slowdown in the U.S. housing market. Ryland earned $94.8 million, or $2.03 a share, compared with $104.3 million, or $2.10 per share, a year earlier. Analysts, on average, expected a profit of $2 a share, according to Thomson First Call. Total revenue rose 3% to $1 billion in the quarter, lighter than the $1.24 billion that analysts expected. Most of the revenue gain was attributable to a 9% increase in the average closing price of a home, which rose to $295,000, the company said. Gross profit margins on home sales in the quarter averaged 23.2%, down from 24.5% a year earlier. The drop was primarily due to $20 million of inventory write-downs and increased sales discounts. Ryland cut its full-year earnings guidance to a range of $7.75 to $8.25, down from its late May guidance of $8.50 to $9 per share. Analysts are looking for $8.03 per share. For the quarter, new orders for homes fell 39% to 3,023 units, with the dollar value dropping 40% to $890.8 million. The company's backlog at quarter end was valued at $2.5 billion, an 18% decrease from a year earlier. In a research note, Bank of America analyst Daniel Oppenheim said the full-year guidance seems optimistic. He expects further deterioration of housing fundamentals into July and expects Ryland to eventually cut its guidance again, closer to his $6.95 estimate. Ryland repurchased 1.8 million shares of its stock during the quarter at a cost of $103.1 million. The company has the authorization to purchase another $101.7 million of additional shares. Oppenheim says future buybacks will be more modest given the continued worsening of housing trends and the company's slight increase in leverage. Ryland's net debt to capital increased to 41% in the second quarter, up from 37% in the first quarter. Also on Wednesday, the Department of Commerce said housing starts in June fell 11% from a year earlier to a seasonally adjusted annual rate of 1.85 million. Economists had been expecting a rate of 1.9 million starts, according to Reuters. In May, the level was 1.95 million. Building permits for new single-family homes in June were at a rate of 1.4 million, which was 6.3% below the May figure of 1.49 million.