Housing starts continue to remain severely depressed, and the outlook remains challenging for homebuilder D.R. Horton (NYSE:DHI). At this point, trying to time when residential real estate will turn is nothing more than a guessing game.

Tutorial: Exploring Real Estate Investments

Thanks to a $59 million tax benefit, Horton reported net income of $28 million in the second fiscal quarter of 2011. As a result, D.R. Horton reported EPS of 9 cents a share, compared with 4 cents per a share in the year ago quarter. Absent the tax benefit, the company lost $30 million, versus a profit of $12 million a year ago. Revenues declined to $733 million in the quarter, compared with $894 million a year ago, respectively. Analyst were expecting an EPS loss of 4 cents during the quarter, along with revenue estimates of $740 million.

No Blue Skies in Sight
Net sales orders for the quarter totaled 4,943 homes, compared to 6,438 homes in the same quarter of fiscal 2010. Management did point out, however, that new home orders and backlog experienced sequential increases of 47% and 37% respectively were due to typically seasonal demand changes, and not any significant fundamental improvements in the housing industry. Indeed, this assessment was confirmed when Builders FirstSource (Nasdaq: BLDR), one of the country's leading suppliers of structural and related building products for residential new construction, reported its most recent quarterly financials. Builders noted that March's seasonally adjusted annual rate for U.S. single-family housing starts decreased to 422,000. (For more, Why Homebuilders Don't Seem To Seem To Be Recovering.)

Still Waiting
Avid observers and analysts focusing on residential real estate are still waiting for the industry to turn. Residential real estate is entering its fifth full year of a down cycle, and there seems to be no immediate catalyst for recovery in site. Of course, the hope is that as new housing starts continue to remain depressed, excess inventory continues to be used up until supply/demand factors turn favorable again for the industry. The market is not yet convinced. While the S&P is up approximately 7% year to date, shares in DHI are relatively flat, year-to-date, as are shares of rival Lennar (NYSE:LEN). Hovnanian Corp (NYSE:HOV) one of the most levered homebuilders in the industry is already down by over 15% year to date. One of the consistently better performers, NVR (NYSE:NVR), is up about 6% year to date. (For more, see Lennar's Profit At Least Encouraging.)

The Bottom Line
Many predicted that 2011 would be the transformative year. Investors should remember that, at some point, housing will turn, but no matter how low the industry dips, it can always go lower. And when it does turn, it could do so very slowly and levels could remain historically muted for years to come. (For more, see It's Not All About The Housing Market.)

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