Lennar 2Q loss narrows; sees worsening conditions

MIAMI — Homebuilder Lennar Corp. said Thursday it managed to narrow its second-quarter loss, but CEO Stuart Miller gave a dour outlook for the industry, saying the housing market has yet to hit bottom and ruling out the prospects of a recovery this year.

"The housing market has continued to deteriorate throughout the first half of 2008. We expect that this trend is going to continue for at least the remainder of the year," Miller told analysts in a conference call after the builder disclosed its financial report card.

Faced with the prospect of ongoing housing doldrums, Miller echoed the building industry's call for the federal government to step in to help break the cycle of rising foreclosures, stagnating home sales and skidding home prices.

"In this fix is the bright light that I see at the end of home building's dark tunnel," he said.

For the three months ended May 31, the Miami-based builder reported a loss of $120.9 million, or 76 cents per share. That compares with a loss of $244.2 million, or $1.55 per share, in the same period a year earlier.

The latest quarter included a 60 cent per share charge stemming from write-downs and write-offs related to land option deposits and other costs.

Revenue plunged 61 percent to $1.1 billion from $2.8 billion last year.

Analysts surveyed by Thomson Financial were expecting a loss of 55 cents per share on revenue of $1.09 billion. The earnings estimates typically exclude one-time items.

Lennar shares tumbled $1.23, or 8.4 percent, to $13.34 on Thursday.

Like other home builders, Lennar has been struggling to compete for buyers amid a glut of foreclosed properties and other unsold homes on the market.

Some good news came from the National Association of Realtors on Thursday. The trade association said sales of previously owned homes rose 2 percent last month to 4.99 million units. But prices continued to drop, driving down the median sales price to $208,600, a decline of 6.3 percent from May last year.

On Wednesday, the Commerce Department reported that sales of new, single-family homes slipped 2.5 percent in May to an annual rate of 512,000 units.

Housing prices, meanwhile, fell at the sharpest rates ever in April, according to data released this week by Standard & Poor's/Case-Shiller.

Despite sharp declines in home prices, Miller told analysts he doesn't believe the housing market has hit bottom.

"Demand patterns are inconsistent and erratic, and we found that there is a constant flow, an increasing flow of foreclosures that are maintaining downward pressure on prices and appraisals," Miller said, adding that he sees foreclosed properties on the market as Lennar's "toughest competitor."

Lennar has homebuilding operations in 14 states, including California and Florida, the hardest-hit housing markets in the nation.

In the most recent quarter, it delivered 3,830 homes, down 60 percent from last year.

The average sale price of homes delivered fell to $274,000 during the quarter compared with $298,000 in the same quarter a year ago. The drop was due pricing discounts and higher sales incentives, the company said.

New orders totaled 4,396 homes, a 45 percent drop.

Lennar's backlog, or homes under contract yet to be delivered, fell during the quarter. As of May 31, the figure stood at 3,958, compared with 8,199 units at the close of the same quarter last year.

The value of homes in backlog plunged by 56 percent from a year ago to $1.3 billion.

Not all the news was discouraging, however.

The cancellation rate from buyers backing out on home contracts was 22 percent, improving from 29 percent in the same quarter last year.

Lennar ended the quarter with about $880 million in cash, and selling, general and administrative expenses were reduced by $238.9 million, or about 60 percent.

Miller also noted that the company now has a solid handle on what its assets are worth, even in a declining market.

The builder has had to take hefty charges to write down land values and deposits from land option contracts, but the latest impairments were "more in the nature of clean-up, rather than reconciliation to unknown market conditions," Miller said.

"We have prepared our companies for market conditions as they currently exist, and we are not projecting a material improvement for some time to come," Miller said. "This should not be confused with abject pessimism. ... This market will rebound. It will have to rebound in order to stimulate the rest of the economy back on to its feet."

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AP Business Writer Jennifer Malloy in New York contributed to this report.

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On the Net:

Lennar Corp.: http://www.lennar.com/

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