March 27 (Bloomberg) -- Lennar Corp., the largest U.S. homebuilder by revenue, said earnings plummeted 73 percent during the fiscal first-quarter as the worst housing slump in more than a decade scared away potential buyers.

Chief Executive Officer Stuart Miller said the spring selling season, when homebuilders usually get the bulk of their orders, failed to materialize, just two months after telling investors this year would be as good or better than 2006.

``Given the state of the market, we do not expect to achieve our previously stated 2007 profit goal,'' Miller said in a statement. ``We are not comfortable providing a new earnings goal at this time.''

Miami-based Lennar's net income for the three months ended Feb. 28 declined to $68.6 million, or 43 cents a share, from $258.1 million, or $1.58, a year earlier, as the biggest drop in U.S. home sales since 1990 batters the industry. Homebuilders' profits are falling as their inventories of unsold homes swell and companies increase incentives to entice buyers. Rising foreclosure rates among borrowers with poor or limited credit histories are pushing even more homes onto the market.

The average estimate of 13 analysts surveyed by Bloomberg was for first-quarter earnings of 39.5 cents a share, excluding certain gains and losses.

``The business is still very soft,'' Robert Curran, a homebuilding analyst at Fitch Ratings in New York, said in an interview.

Can't Predict Recovery

Lennar said on Jan. 17 that its 2007 earnings would match or beat 2006 profit of $593.9 million, or $3.69 a share. Today the company said it couldn't predict when a recovery would come.

Consumers have held off on buying houses on concern that the price of their house will fall, or on hopes they'll get a bargain later.

``Market conditions are very difficult across the country,'' Miller said on a conference call. ``The industry is continuing to be challenged to adjust home prices and land values as well. It is unclear today where there is another shoe to drop.''

Demand during the spring selling season, which starts in February, ``has not yet materialized,'' Miller said in the statement. The troubles of subprime lenders, which have been forced to curtail lending as default rates rise, have also eliminated some potential buyers, he said.

`Fairly Contained'

``As we look through the first quarter, there was a very, very small percentage that canceled because of mortgage products that had evaporated or the subprime issue,'' Miller said on the call. ``As we went through each division, it still seemed that this was going to be fairly contained.''

Revenue for the quarter plunged 14 percent to $2.79 billion from $3.24 billion as the number of homes delivered fell by 3.9 percent to 8,566. The average selling price dropped 7 percent to $303,000 as sales incentives more than tripled to $45,500 per home. The company's cancellation rate was 29 percent in the quarter.

Lennar posted a loss on land sales of $26.5 million in the first quarter relating to options over 4,000 sites it no longer intends to buy, compared with a profit of $49.1 million a year earlier.

It booked a pretax gain in the quarter of $175.9 million after selling part of its stake in LandSource Communities Development LLC, a joint venture with LNR Property Corp., to MW Housing Partners. It could make further profit from its stake of as much as $400 million ``in future years.'' the company said.

Shares Fell

Shares of Lennar fell 4 cents to $44.50 in New York Stock Exchange composite trading today. The stock tumbled 15 percent this year, compared with a 16 percent drop for a Standard & Poor's measure of homebuilders. The Standard & Poor's homebuilders index fell 1.4 percent today.

Over the past five years, Lennar shares rose 138 percent, or an annual equivalent of 17 percent.

The Commerce Department said the number of houses for sale at the end of February increased to 546,000 from 538,000 in January. That left the supply of homes at the current sales rate at 8.1 months' worth, compared with 7.3 months in January. The number of homes completed and awaiting a buyer rose to 179,000 last month.

In January, Lennar CEO Stuart Miller said profit may rise this year provided employers keep hiring, interest rates remain low and a ``healthy economy continues.''

In a full-page advertisement in the Chicago Tribune on March 18, Lennar offered buyers a free 42-inch plasma television with the purchase of any ``quick-delivery home,'' a property close to completion.

Margins Fall

Gross profit margins on home sales fell to 15.6 percent in the quarter from 24.9 percent a year earlier because of higher sales incentives to lure potential customers.

The value of Lennar's backlog, or homes under contract and not yet sold, plunged 51 percent to $3.45 billion from $7.1 billion.

Lennar's orders declined the most in its central region, which it defines as Arizona, Colorado and Texas.

The company mainly sells houses to first-time homebuyers, purchasers seeking to move up from their first home and ``active adult'' consumers who are at least 55 years old.

Lennar was founded in 1954 as a local builder in Miami and sold shares to the public in 1971.

To contact the reporters on this story: Brian Louis in Chicago at blouis1@bloomberg.net; Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net.

Last Updated: March 27, 2007 17:41 EDT