The homebuilding industry continues to get worse. The latest in the ongoing string of bad news in the sector came Friday from Centex ( CTX), which said it plans to record nearly $1 billion of write-downs associated with its home and land inventory, while also making it clear that the housing market continues to deteriorate further. Dallas-based Centex, one of the country's largest homebuilders, said the "housing market continues to be extremely difficult." New orders for the quarter ended Sept. 30 fell 13% from a year earlier, which was already a weakened sales base. Home closings fell 14% from a year ago, while backlog dropped 38%. The large charges result from the ongoing slowdown in the housing market. As homebuilders are slashing prices, they're finding communities under development and future land pipelines are no longer profitable. Under accounting rules, the builders must then write down the values on their balance sheets to a level that allows for the inventory to be sold at a profit. For the fiscal second quarter, Centex expects to record an impairment of about $850 million for neighborhood and land inventory, and an impairment and option write-off of about $40 million for the company's share of land holdings in joint ventures. Additionally, Centex expects to write off option deposits and pre-acquisition costs of about $40 million, and to record a goodwill impairment of $65 million related to a previous acquisition.
The company also anticipates its mortgage subsidiary will record a provision of $60 million for increased losses related to the mortgage market and credit exposure. "These adjustments reflect the market's further deterioration over the quarter and the significant effects of the mortgage-market disruptions," Centex CEO Timothy Eller said in a statement. "We remain steadfastly focused on the fundamentals of selling homes and generating cash." Centex said it generated positive cash flow in the quarter. It cut its fiscal 2008 cash flow projection to $500 million from its previous forecast of $750 million, "reflecting the impact of worsening conditions in the housing market." Shares of Centex recently were down $1.18, or 4%, to $28.25.