Housing Bubble

M.D.C Holdings reports record second quarter homebuilding profits

July 16, 2003

M.D.C. Holdings, Inc yesterday announced homebuilding operating profits for the quarter and six months ended June 30, 2003 were $85.3 million and $149.8 million, respectively, representing increases of 39% and 26% over profits of $61.2 million and $119.1 million, respectively, for the same periods in 2002. The increases in the 2003 periods primarily are the result of the record levels of home closings and, for the second quarter, higher home gross margins. The Company closed 2,624 homes and 4,724 homes, respectively, in the second quarter and first six months of 2003, 34% and 30% higher, respectively, than home closings in the same periods in 2002. Home sales revenues for the three and six months ended June 30, 2003 increased to $672 million and $1.226 billion, respectively, compared with home sales revenues of $497 million and $942 million for the same periods in 2002. For the second quarter and first six months of 2003, the Company's average selling prices were $256,300 and $259,500, respectively, compared with $254,000 and $259,500 for the same periods in 2002, and home gross margins increased to 23.3% and 23.0%, respectively, compared with 22.5% and 22.9%.

Paris G. Reece III, MDC's executive vice president and chief financial officer, said, "Each of our homebuilding divisions outside of Colorado posted improved results compared with the 2002 second quarter, evidencing the success of our efforts to diversify our operations geographically. We realized particularly strong earnings growth in Las Vegas, Phoenix, Southern California and Virginia, primarily due to improved home gross margins in Las Vegas and Southern California and increases in active subdivisions that produced substantially more home closings in each of these markets. Our total of 190 active subdivisions at June 30th is 15% higher than a year ago. The slight decline over the last 90 days primarily is the result of selling out of a number of active subdivisions earlier than expected due to our strong orders received year-to-date. The impact of this order strength may cause an earlier sell-out of additional subdivisions over the balance of this year. As a result, when combined with anticipated delays in opening certain new subdivisions, the number of our active subdivisions should remain relatively consistent with current levels for the balance of this year, with more substantial growth anticipated in the 2004 first quarter."

Reece continued, "As anticipated, average selling prices in the 2003 second quarter declined from the first quarter, primarily due to a greater relative number of homes closed in our lower-priced Phoenix and Las Vegas markets, as well as lower average selling prices in Southern California resulting from our increased emphasis on providing more-affordable homes in the Inland Empire. These factors, as well as increased closings from our divisions in Salt Lake City and Dallas/Fort Worth, should cause average selling prices to decline further by as much as 5% in the 2003 third quarter."

Operating profits from the Company's financial services operations increased to $8.6 million and $16.2 million, respectively, for the quarter and six months ended June 30, 2003, compared with profits of $5.2 million and $10.2 million, respectively, for the same periods in 2002. The profit improvements in 2003 primarily resulted from increased gains on sales of mortgage loans due to a higher volume of mortgage loan originations and the favorable mortgage interest rate environment. Reported gains on sales of mortgage loans may vary significantly from period to period depending on the volatility in the interest rate market. The Company received a record $5.2 million in mortgage loan origination income in the 2003 second quarter on $456 million in mortgage loans originated, 31% higher than the $4.0 million received on $338 million of originations for the same period in 2002.

All earnings per share amounts discussed above are on a diluted basis. Earnings per share, book value per share, weighted average shares outstanding and dividends paid per share have been restated for the effects of the Company's May 2003 10% stock dividend.

MDC, whose subsidiaries build homes under the name "Richmond American Homes," is one of the largest homebuilders in the United States. The Company also provides mortgage financing, primarily for MDC's homebuyers, through its wholly owned subsidiary, HomeAmerican Mortgage Corporation. MDC is a major regional homebuilder with a significant presence in some of the country's best housing markets. The Company is the largest homebuilder in Colorado; among the top five homebuilders in Northern Virginia, Phoenix, Tucson and Las Vegas; and among the top ten homebuilders in suburban Maryland, Northern California, Southern California and Salt Lake City. MDC also has a growing presence in Dallas/Fort Worth and has recently entered the Houston and Philadelphia/Delaware Valley markets.

Forward-Looking Statements

Certain statements in this release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward- looking statements. Such factors include, among other things, (1) general economic and business conditions; (2) interest rate changes; (3) the relative stability of debt and equity markets; (4) competition; (5) the availability and cost of land and other raw materials used by the Company in its homebuilding operations; (6) the availability and cost of performance bonds and insurance covering risks associated with our business; (7) shortages and the cost of labor; (8) weather related slowdowns; (9) slow growth initiatives; (10) building moratoria; (11) governmental regulation, including the interpretation of tax, labor and environmental laws; (12) changes in consumer confidence and preferences; (13) required accounting changes; (14) terrorist acts and other acts of war; and (15) other factors over which the Company has little or no control.

Source: M.D.C. Holdings, Inc.