Dominion Homes Reports Financial Results for the Second Quarter of 2006

Dominion Homes, Inc. (NASDAQ:DHOM) today announced
financial results for the three months ended June 30, 2006. Highlights
for the second quarter of 2006 compared to the second quarter of 2005
included:

   --  A net loss of $5.9 million, or $0.73 per diluted share, versus
        net income of $2.5 million, or $0.31 per diluted share;

   --  Revenues of $75.8 million, from the delivery of 398 homes
        versus revenues of $105.2 million, from the delivery of 548
        homes;

   --  Sales of 356 homes, with a sales value of $66.2 million,
        versus sales of 655 homes, with a sales value of $123.1
        million;

   --  A backlog of 548 sales contracts, with an aggregate sales
        value of $109.5 million, versus 887 sales contracts, with a
        sales value of $177.1 million at June 30, 2005;

   --  Selling, general and administrative expenses of $13.5 million
        versus $17.2 million; and

   --  The current quarter results include a pretax, non-cash charge
        of $2.1 million primarily related to write-offs of land
        deposits and pre-acquisition costs and a $456,000 gain on the
        sale of land.

   The second quarter 2006 net loss was expected based on the low
number of sales contracts in backlog at the beginning of the period
combined with the delivery of homes with less gross profit due to
increased sales discounts and increased land and construction costs.
   Douglas G. Borror, Chief Executive Officer, commented, "While we
are disappointed with reporting a loss for this quarter, we also
recognize that overall home sales conditions remain challenging in our
markets. New building permits declined 27% in Columbus, 39% in
Louisville and 20% in Lexington during the first six months of 2006.
We did, however, make significant progress in reducing our land
development and acquisition costs and lowering our selling, general
and administrative expenses during the second quarter and will
continue to manage these areas."
   The Company will host a conference call on Friday, August 4, 2006
at 10:00 a.m. Eastern Time to discuss these results and other
developments in the business. The analyst conference call will be
webcast simultaneously in listen-only mode via the Company's website
www.dominionhomes.com. For those who cannot listen to the live
webcast, an archived replay will be available at www.dominionhomes.com
beginning on August 5, 2006 and continuing for approximately 60 days.
Interested parties may listen in by accessing the Company's website,
and selecting "Investors."
   Dominion Homes offers a variety of homes, which are differentiated
by size, price, standard features and available options. The Company's
"The Best of Everything" philosophy focuses on providing its customers
with unsurpassed products, quality, and customer service. Additional
information about the Company and its homes is located on its website.

   Second Quarter of 2006

   Net Loss.

   The Company recognized a net loss for the second quarter of 2006
of $5.9 million, or $0.73 per diluted share, compared to net income of
$2.5 million, or $0.31 per diluted share for the second quarter of
2005. The loss in the second quarter of 2006 is principally a result
of fewer closings and a decline in the Company's gross profit margin.

   Revenues.

   Revenues for the second quarter of 2006 were $75.8 million from
the delivery of 398 homes, compared to $105.2 million from the
delivery of 548 homes during the same period the previous year. The
average delivery price of homes during the second quarter of 2006 was
approximately $188,900 compared to $189,600 during the second quarter
of 2005. There were no model home sale/lease backs during the second
quarter of 2006. Second quarter 2005 revenues include the sale of 20
model homes, with a sales value of $3.2 million, which the Company
immediately leased back for use as sales models.

   Gross Profit.

   Gross profit for the second quarter of 2006 declined to $7.5
million compared to $22.4 million for the second quarter of 2005,
principally due to the delivery of 150 fewer homes and an 11.4%
decrease in gross profit margin. Included in cost of sales for the
second quarter of 2006 is a $2.1 million write-off primarily related
to deposits and pre-acquisition costs incurred for land the Company
decided not to purchase and a $456,000 gain from the sale of land.
Included in cost of sales for the second quarter of 2005 is a similar
write-off of $1.4 million and an $824,000 gain from the sale of land.
These transactions reduced the second quarter 2006 and 2005 gross
profit margin by 2.2% and 0.5%, respectively.

   Selling, General and Administrative Expense.

   Selling, general and administrative expense for the second quarter
of 2006 decreased to $13.5 million from $17.2 million for the second
quarter of 2005. Second quarter 2006 expenses include the separation
costs associated with a reduction in the Company's workforce that was
implemented in May of 2006 and the benefit of lower expenses related
to commissions, bonuses and other performance based compensation
programs. The cost savings programs implemented during the second
quarter of 2006 are expected to reduce the level of selling, general
and administrative expense by an additional 10% during the third and
fourth quarters of 2006. The Company is continuing to reduce its cost
structure in response to changing market conditions and projected
sales levels and expects to generate further cost savings during the
second half of 2006.

   Sales

   The Company sold 356 homes, with a sales value of $66.2 million,
during the second quarter of 2006 compared to 655 homes, with a sales
value of $123.1 million, sold during the same period the previous
year. The average home sale price for the second quarter of 2006 was
$186,000 compared to $187,900 for the second quarter of 2005. Backlog
at June 30, 2006 was 548 sales contracts with an average sale price of
$200,000 compared to 887 sales contracts with an average sale price of
$199,700 at June 30, 2005.

   Active Sales Communities

   The Company had 55 active sales communities at June 30, 2006
compared to 61 at June 30, 2005. Effective June 30, 2006, the Company
began reporting its number of active sales communities by geographic
location rather than by series of homes. This change was implemented
due to the development of a limited number of master planned
communities that contain as many as five different series of homes. In
most cases these master planned communities are in a single geographic
location and are usually promoted using a similar, common community
name. This change reduced the number of active sales communities
reported at June 30, 2005 to 61 from 63.

   First Six Months of 2006

   Net Loss.

   The Company recognized a net loss for the first six months of 2006
of $9.9 million, or $1.22 per diluted share, compared to net income of
$3.2 million, or $0.39 per diluted share, for the same period in 2005.

   Revenues.

   Revenues for the first six months of 2006 were $137.6 million from
the delivery of 713 homes, compared to $197.8 million from the
delivery of 1,026 homes during the same period the previous year. The
average delivery price of homes during the first half of 2006 was
approximately $191,100 compared to $190,500 during the first half of
2005.

   Gross Profit.

   Gross profit for the first six months of 2006 declined to $16.6
million compared to $41.1 million for the first six months of 2005,
principally due to the delivery of 313 fewer homes and an 8.7%
decrease in gross profit margin. Included in cost of sales for the
first half of 2006 is a $2.7 million write-off primarily related to
deposits and pre-acquisition costs incurred for land that the Company
decided not to purchase and a $456,000 gain from the sale of land.
Included in cost of sales for the first half of 2005 is a similar
write-off of $2.4 million and an $824,000 gain from the sale of land.
These transactions impacted the first half 2006 gross profit margin by
1.6% and the first half 2005 gross profit margin by 0.8%.

   Selling, General and Administrative Expense.

   Selling, general and administrative expense for the first six
months of 2006 decreased to $28.2 million from $33.3 million for the
first six months of 2005. First half 2006 expenses include separation
costs associated with of a reduction in the Company's workforce that
was implemented in May of 2006 and the benefit of lower expenses
related to commissions, bonuses and other performance based
compensation programs.

   Sales.

   The Company sold 831 homes, with a sales value of $155.5 million,
during the first six months of 2006 compared to 1,281 homes, with a
sales value of $243.9 million, during the first six months of 2005.
The average home sale price for the first half of 2006 was $187,100
compared to $190,400 for the first half of 2005.

   Gain on Sale of Investment in Centennial Home Mortgage, LLC

   On March 31, 2006 the Company, Dominion Homes Financial Services,
Ltd, Wells Fargo Bank N.A. and its wholly owned subsidiary Wells Fargo
Ventures, Inc. formed a new joint venture, Centennial Home Mortgage,
LLC, which operates as a full service mortgage bank. The Company
recognized a gain of approximately $1.8 million in exchange for a
50.1% interest in the joint venture sold to Wells Fargo. The Company
continues to own the remaining 49.9%. The joint venture utilizes Wells
Fargo's underwriting expertise, quality control practices, software
systems, operating policies and training programs. The Company is in
the process of exiting the operations of Dominion Homes Financial
Services, Ltd and expects to complete the processing of the current
pipeline of loan activity by the end of the third quarter of 2006. In
July 2006 the Company received notices from the U. S. Department of
Housing and Urban Development indicating that it had completed its
review of Dominion Homes Financial Services operations with no
material adverse findings.

   Certain statements in this news release are "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such statements involve known and unknown risks,
uncertainties and other factors that may cause actual results to
differ materially. Such risks, uncertainties and other factors
include, but are not limited to, changes in national or local economic
conditions, changes in federal lending programs, fluctuations in
interest rates, increases in raw materials and labor costs, levels of
competition and other factors described in the Company's Annual Report
on Form 10-K for the year ended December 31, 2005. All forward-looking
statements made in this press release are based on information
presently available to the management of the Company. The Company
assumes no obligation to update any forward-looking statements.
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                         FINANCIAL HIGHLIGHTS

                              (Unaudited)
          (In thousands, except share and per share amounts)

                 Consolidated Statements of Operations


                            Three Months Ended     Six Months Ended
                                 June 30,              June 30,
                              2006       2005       2006       2005
                           ---------- ---------- ---------- ----------

Revenues                     $75,835   $105,207   $137,620   $197,850
Cost of real estate sold      68,310     82,830    121,021    156,779
                           ---------- ---------- ---------- ----------

Gross profit                   7,525     22,377     16,599     41,071
Selling, general and
 administrative               13,467     17,244     28,240     33,292
                           ---------- ---------- ---------- ----------
Income (loss) from
 operations                   (5,942)     5,133    (11,641)     7,779
Gain on sale of investment
 in Centennial Home
 Mortgage, LLC                     -          -      1,800          -
Interest expense              (2,568)    (1,873)    (4,876)    (3,564)
                           ---------- ---------- ---------- ----------

    Income (loss) before
     income taxes             (8,510)     3,260    (14,717)     4,215

Provision for income taxes    (2,583)       741     (4,844)     1,054
                           ---------- ---------- ---------- ----------

     Net income (loss)       $(5,927)    $2,519    $(9,873)    $3,161
                           ========== ========== ========== ==========

Earnings per share (loss)
   Basic                      $(0.73)     $0.31     $(1.22)     $0.39
                           ========== ========== ========== ==========
   Diluted                    $(0.73)     $0.31     $(1.22)     $0.39
                           ========== ========== ========== ==========

Weighted average shares
 outstanding
   Basic                   8,114,174  8,054,648  8,104,494  8,049,844
                           ========== ========== ========== ==========
   Diluted                 8,114,174  8,203,815  8,104,494  8,206,933
                           ========== ========== ========== ==========


                      Consolidated Balance Sheets

                            (In thousands)

                                                June 30,  December 31,
                                                  2006        2005
                                               (unaudited)
                                               -----------------------
                               Assets
Cash and cash equivalents                           $705       $3,554
Accounts receivable                                3,234        4,889
Real estate inventories                          405,652      426,275
Prepaid expenses and other                        14,499        8,792
Deferred income taxes                              1,044        1,485
Net property and equipment                         5,556        6,562
                                               ---------- ------------
    Total assets                                $430,690     $451,557
                                               ========== ============

                          Liabilities and
                        Shareholders' Equity
Note payable, banks                             $207,628     $205,240
Term debt                                          9,300        9,300
Other liabilities                                 27,690       41,484
                                               ---------- ------------
    Total liabilities                            244,618      256,024
                                               ---------- ------------
Shareholders' equity                             186,072      195,533
                                               ---------- ------------
    Total liabilities and shareholders' equity  $430,690     $451,557
                                               ========== ============


                   Lot Inventory as of June 30, 2006


                                          Unimproved
                    Finished Lots Under       Land          Total
Land Inventory        Lots   Development Estimated Lots Estimated Lots
------------------- -------- ----------- -------------- --------------

Owned by the
 Company:
   Central Ohio       1,776         976          9,936         12,688
   Kentucky             285         390            955          1,630
Controlled by the
 Company:
   Central Ohio           -           -          1,494          1,494
   Kentucky               -           -              -              -
Held for sale:
  Central Ohio            -          40            558            598
  Kentucky                -          46            137            183
                    --------------------------------------------------
Total Land
 Inventory            2,061       1,452         13,080         16,593
                    ======== =========== ============== ==============
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