Log In | Register
LOS ANGELES — Homebuilder Lennar Corp. said Monday that its fiscal third-quarter profit fell 31 percent as it sold fewer houses than it did a year earlier.
Home deliveries fell partly by comparison with a period last year when many buyers were racing to get their home purchases completed in time to qualify for federal homebuyer tax credits.
Conversely, Lennar's new home orders in the latest quarter benefited from the comparison with softer orders last summer and rose 11 percent. That was the first quarterly increase in more than five years, excluding the first half of 2010, when new orders also rose due to the housing tax credits.
"Throughout our third quarter, we continued to see evidence that the consumer is beginning to return in earnest to the homebuilding market," said CEO Stuart Miller.
But he warned new-home demand remains constrained by strict lending requirements and weak consumer confidence.
This was the sixth consecutive quarter that the Miami-based homebuilder has turned in a profit, even with sales of new homes slowing after a lackluster spring.
New home sales fell in four out of the seven months between January and July, threatening a total even lower than 2010's, which would make 2011 the worst year for new-home sales on records dating back at least half a century.
On Monday, the National Association of Home Builders said its index of builder sentiment fell to 14 from 15 this month. Any reading below 50 indicates negative sentiment about the housing market.
New homes make up a small portion of sales but have an outsize impact on the economy. The builders' trade group says each new home built creates an average of three jobs for a year and generates about $90,000 in taxes.
High unemployment, larger down-payment requirements and tougher lending standards are preventing many people from buying homes. And some potential buyers who can clear those hurdles are holding off, worried that home prices have yet to bottom out. Builders also are struggling to compete with the large number of foreclosed properties on the market.
Miller singled out buyers' financing hurdles as a major drag on new home sales.
He argued that banks have become too conservative in their lending standards, noting that Lennar customers who were denied a government-backed home loan over the past 18 months had an average FICO score of about 650.
"The logical extension of where we are is that we make only one loan for $200,000 to Warren Buffett and we will never have a default," Miller said, in a reference to the billionaire investor. "Unfortunately, we will also not have much of a housing market."
A scheduled rollback on Oct. 1 in the size of mortgages that government-controlled companies can buy or guarantee also will make it harder for homebuyers to obtain financing, the executive said.
Still, Miller predicted that Lennar would be profitable in the fourth quarter and for the full year, assuming market conditions remain stable.
One element of Lennar's profitable run is the builder's Rialto division, which buys troubled loans and properties from banks. The unit has been a key contributor to the company's bottom line.
In June through August, Rialto's operating earnings fell to $11.7 million from $18.5 million, but revenue climbed to $42.1 million from $38 million.
Lennar has operations in 17 states and is the third-largest homebuilder in the U.S., based on homes delivered last year.
The company reported net income of $20.7 million, or 11 cents a share, for the three months that ended Aug. 31, down from $30 million, or 16 cents per share, a year earlier.
That earnings figure matched the average expectations of analysts polled by FactSet.
Revenue dipped 1 percent to $820.2 million from $825 million, but beat Wall Street's estimate of $794.4 million, according to FactSet.
Lennar shares rose 67 cents, or 4.9 percent, to close at $14.47 on Monday as the broader market sank.
The company's home deliveries fell 3 percent to 2,865 homes, while new orders rose 11 percent to 2,914 homes. Analysts estimated, on average, an annual increase of nearly 8 percent in orders, according to FactSet.
The average sale prices of homes Lennar delivered increased 3 percent to $247,000 from $240,000. Sales incentives rose to $33,600 per home delivered from $30,600 per home delivered in the prior-year period.
Lennar said its cancellation rate was 20 percent for the quarter, while backlog climbed 16 percent to 2,519 homes.
