HOME BUILDING SLAMS ON THE BRAKES.

Byline: GREGORY J. WILCOX

The home-building sector received a pounding in the second quarter. And the hammering is going to continue in this quarter, too.

``If bad news came in torrents in the first quarter, the second quarter was a tidal wave,'' analyst Steven East of Susquehanna Financial Group LLLP said in an assessment that arrived in my in-box on Friday.

``We believe participants in this sector will look back and say this was the quarter that reality set in for both investors and management teams.''

The badness that came forth in earnings reports included widespread land option write-offs, plummeting order rates and gross margins, and skyrocketing cancellation rates, according to East.

Some of this visited Calabasas-based The Ryland Group, which sells homes in 16 states coast to coast.

For example, in its second- quarter earnings released in the middle of last month the company reported that:

Orders plunged 39.4 percent to 3,023 units from the like period in 2005, the second-biggest decline for the sector.

Profits fell 9.1 percent for the quarter ended June 30 to $94.8 million, equal to $2.03 per share, from $104.3 million, $2.10 per share, in the year-ago period.

Revenues totaled $1.2 billion for the quarter ended, up 3.2 percent.

In a conference call at the time, Ryland Chief Executive Officer Chad Dreier said that selling homes is now a challenge in nearly every market.

``While we knew that eventually there would be a slowdown in housing, this downturn happened quicker than expected,'' he said during the call, according to the Web site MarketWatch.com.

Ryland officials could not be reached on Friday.

East doesn't see much relief in sight.

``Orders are negative for all builders and a disaster for most,'' he said, noting that they were down nearly 25 percent sector-wide.

``We wish we could say at least one builder had growth, but we can't ... Dramatically ballooning cancellation rates created carnage in the industry.''

Hanley Wood Market Intelligence released on Friday offered more evidence that the slowdown has traction.

Both the new and previously owned housing markets showed signs of malaise in June. New home sales fell 3 percent May to June.

Year-over-year they are off 11 percent. At this pace there is a 6.1-month supply on the market, the company said.

And May's 6.8-month supply of previously owned homes for sale is a glut not seen since May 1993.

On a seasonally adjusted basis, sales of previously owned homes have fallen from their year-ago level for seven consecutive months. June's 8.94 percent drop was the biggest since April 1995.

Sales declines are bigger in California. Weakness in the resale market is not going to help the new home market get out of its funk, either.

``In the months ahead we can expect to see continued volatility in the market as many homebuyers remain on the sidelines to ensure they won't be buying homes that could be in the middle of a downward turn in valuation,'' Hanley Wood said.

One thing is certain.

We haven't seen a prime homebuying season like this in a long time.

Finally: E-mail from Happy Renter offers this observation on the observation of Jay Brinkmann, vice president of research at the Mortgage Bankers Association, about the spike in foreclosure activity during the second quarter.

Brinkmann: ``There is nothing in economic fundamentals in household creation or job creation that is looking toward any kind of meltdown in housing prices. I think we are just getting back to a more normal market.''

Happy Renter: ``Oh, yes! There is! Most people's incomes aren't going up, yet everything else that is necessary (food, gas, housing, medical) is going up.''

greg.wilcox(at)dailynews.com

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