Major builders might be narrowing their losses, but there's still no signs of an imminent turnaround for a battered sector limping into yet another year of pain.

Late Wednesday, both Meritage Homes Corp. (MTH) and Ryland Group Inc. (RYL) dramatically shaved fourth-quarter losses. But the negative commentary continues as consumers remain jittery with the credit crisis roiling the globe, depressing builders' orders and selling prices and fueling cancellations and impairments. As job losses continue and foreclosures mount, recovery may not come until next year.

Shares of builders fell at the open, with Meritage down nearly 4%. Ryland dipped more than 1%, compared with a nearly 2% drop for the Dow Jones US Home Construction Index.

"Economic conditions in the fourth quarter of 2008 were the worst we've experienced to date," said Steven J. Hilton, chairman and chief executive of Meritage. "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."

The Arizona-based builder posted its seventh consecutive quarterly 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 cancellation rate was 56%, showing many customers decided not to buy.

Analysts have long been fans of Meritage because 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 its 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.)

Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary. You can use this link on the day this article is published and the following day.