Lennar Reports Quarterly Loss as Foreclosures Rise
September 23 2008 - Lennar Corp., the second-largest U.S. homebuilder, reported its sixth straight quarterly loss as potential buyers struggled to get mortgages and rising foreclosures increased the supply of homes on the market.
The fiscal third-quarter net loss narrowed to $89 million, or 56 cents a share, from $513.9 million, or $3.25 a share, a year earlier, Miami-based Lennar said today in a statement. Revenue fell 53 percent to $1.1 billion.
“The weakness in the market actually accelerated as a result of increased foreclosures, weakened consumer confidence and tightened mortgage lending standards,” Chief Executive Officer Stuart Miller said in the statement.
Lennar was forced to cut prices and build fewer homes after foreclosures accelerated to the fastest pace in almost three decades in the second quarter. Restrictions on lending and declining home prices have led to the steepest housing decline since the Great Depression of the 1930s.
Lennar was projected to report a net loss of 60 cents a share for the three months ended Aug. 31, according to the average estimate of 12 analysts in a Bloomberg survey.
Price Cuts
Miller, like other homebuilding executives, has offered incentives to lure buyers. The average price of a Lennar home in the quarter fell 9 percent to $270,000 from a year earlier and the company sold the most homes in Arizona, Colorado and Texas. The median U.S. new home price was $230,700 in July.
“The sentiment is still pretty darn bad,” Eric Landry, an analyst at Morningstar, said before the results were issued. “The headwinds are still numerous and stiff.”
Lennar rose 23 cents, or 1.7 percent, to $13.97 at 9:38 a.m. in New York Stock Exchange composite trading. The shares fell 46 percent in the 12 months through yesterday, making it the worst performer in a Standard & Poor’s index of U.S. homebuilders.
Revenue from home sales fell 54 percent in the quarter to $995.7 million, Lennar said. The company attributed the decline to a 49 percent drop in deliveries and a 9 percent decrease in the average sales price.
The number of homes sold fell 50 percent to 3,791 and new orders plunged 42 percent. The value of the company’s backlog, or homes under contract and not yet sold, fell 53 percent to $1.05 billion.
Land Write off
Lennar cut selling, general and administrative expenses by $148 million, partly because of job cuts. The company’s gross profit margin on home sales, excluding property writedowns and expenses, was 18 percent in the quarter, compared with 14 percent a year ago.
“A lot of investors are going to take heart in that,” Dan Poole, senior vice president of equity research at National City Bank in Cleveland, said in an interview on Bloomberg Radio.
Lennar’s results were hurt by $132.3 million in expenses, including writedowns for land, investments in joint ventures and writeoffs of land options on property it doesn’t plan to buy. In the year-ago quarter, the company recorded $856.8 million in such expenses.
The federal government needs to do more to help the housing market, Miller said in the statement.
“Although the Federal government has recognized that stabilizing the housing market is critical to solving the current credit crisis, the government has yet to act meaningfully to help stabilize home prices,” Miller said in the statement.
New home sales are forecast to fall to a 510,000 annual pace in August from 515,000 in July, according to Bloomberg survey estimates. The Commerce Department will report new-home sales data Thursday.
About 75 percent of U.S. banks surveyed indicated they tightened standards on prime mortgages, up from 60 percent in the previous survey, the Federal Reserve said on Aug. 11.
The S&P/Case-Shiller measure of home prices in 20 metropolitan areas fell 0.5 percent in June from the previous month, with nine areas reporting a gain compared with seven in May. Prices were down 15.9 percent from the previous year.
Lennar Reports Quarterly Loss as Foreclosures Rise
by Brian Louis | Bloomberg