The home building sector's star has finally dimmed.

NVR Inc. (NVR), which has long outshone its peers by shunning land ownership, said it swung to a quarterly loss, another blow for a battered sector limping through a prolonged downturn that shows few signs of letting up.

Indeed, Thursday, the government said new home sales plunged in December, capping the worst year for sales since 1982, while two other large builders, Meritage Homes Corp. (MTH) and Ryland Group Inc. (RYL), reported losses late Wednesday. The barrage of negative headlines battered builder stocks. NVR fell nearly 7%, compared with a 4.75% loss for the Dow Jones US Home Construction Index.

Meritage fell nearly 10%, easily making it the sector's biggest loser. Ryland posted a nearly 3% gain.

Before the market opened Thursday, Reston-Virginia based NVR said it lost $30.46 million, or $5.54 a share for the quarter ended Dec. 31, compared to net income of $67.27 million, or $11.72, a year earlier.

The company, which took about $121 million in asset impairment charges, also said that as of Feb. 4 Dwight C. Schar, the executive chairman, will relinquish the executive officer title, but remain chairman of the board.

The loss is the company's first of the downturn, said Alex Barron, Agency Trading Group's building analyst. Unlike other builders, he doesn't expect future large impairments because of the lack of land ownership and just $29 million of options remaining on the books, he said.

"I don't think anybody was expecting" the loss, Barron said, adding that without the charge the company would have made money. "What this writeoff means is they don't believe that a lot of the land options that they had contracted would be profitable if they would go ahead and build those houses."

Exercising those options would mean building at a loss, Barron pointed out. The question is: What now?

"That's where it becomes a little bit interesting," he said.

The notoriously guarded company - which went bankrupt in the last residential downturn and avoids conference calls - said the quarter's new orders decreased 30%. The cancelation rate was also 30%, dipping from 32% a year earlier, some of the lowest rates to come from builders recently.

"Relative to the rest of the industry, they still look like they're outperforming," said Robert Curran, Fitch Rating's lead home-building analyst.

Meritage and Ryland's numbers weren't as grim: They shaved their fourth-quarter losses. But Meritage still said the quarter was painful.

"Economic conditions in the fourth quarter of 2008 were the worst we've experienced to date," said Steven J. Hilton, Meritage's chairman and chief executive. "The reverberations from the financial crisis that began in September 2008 impacted all of our markets, and we experienced a substantial decrease in traffic and sales."

Arizona-based Meritage posted its seventh consecutive quarter of red ink, with a net loss of $79.1 million, or $2.58 a share, compared with $128.8 million, or $4.91 a share, a year earlier.

Closing revenue fell 35% to $399.6 million, while net orders plunged 52%. Closings took a 30% hit, while the average selling price fell about 10% to $259,800. During the 2006 heyday, the average closing price topped $330,000, according to JPMorgan.

The most recent cancelation rate was 56%, showing many customers decided not to buy.

Analysts have long been fans of Meritage because, like NVR, it favors options instead of owning land. But they're concerned about Meritage's strategy of depending on Texas to survive the downturn. The Lone Star State, which accounted for 52% of last year's revenue, saw orders crumble 61%.

"The significant weakness in Texas is troublesome," noted Credit Suisse's Dan Oppenheim.

Hilton said the company was responding and it remains confident in what remains its strongest region because of population and employment growth and housing affordability.

"We were swift in taking aggressive actions in Texas as our net sales there fell during the quarter," he said. "We closed certain communities, sold some assets and consolidated operations in the region. We'll continue to be cautious until we are more comfortable with the activity in our Texas region."

California-based Ryland, meanwhile, reported a net loss of $59.9 million, or $1.40 a share, compared with a year-ago loss of $201.9 million, or $4.80 a share.

Revenue tumbled 39% to $528.2 million, while orders dropped 65%. Closings slid 36% to 1,964.

The average home price dropped 8.6% to $246,000. That's down from nearly $300,000 during the boom, according to JP Morgan.

To jumpstart business in time for the spring selling season, builders are unveiling eye-catching specials. Last week, luxury builder Toll Brothers Inc. (TOL) surprised the industry when it lowered the rate of its 30-year, fixed-rate mortgage to 3.99%. Industry giant Lennar Corp. (LEN) beat that with 3.875% in some markets.

Hovnanian Enterprises (HOV) is working on a program that would pay mortgages for some unemployed homeowners. Pulte Homes (PHM), meanwhile, will make payments until 2010 for qualified buyers in some markets.

Home builders have strongly lobbied Congress to expand on a $7,500 temporary tax credit for first-time home buyers, making it available to all home buyers and eliminating a requirement to pay the credit back over time.

But Hilton said he's not counting on that: "We fully expect 2009 will be another challenging year, and are not hanging our hopes on 'rescue packages' that are out of our control."

-By Dawn Wotapka, Dow Jones Newswires; 201-938-5248; dawn.wotapka@dowjones.com

(John Kell contributed to this report.)

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