Lennar CEO Says Spring Home Selling Season Yet to Signal Start of Recovery
Home sales haven’t recovered for the U.S. spring selling season, usually the busiest time for buyers, Lennar Corp. (LEN) Chief Executive Officer Stuart Miller said.
“The long-awaited selling season of 2011 has not yet defined itself as the beginning of a recovery cycle,” Miller said during a conference call with investors today. “While we continue to see promising signs that a recovery is forming and that housing will rebound, there continues to be negative pressure on volume and sales prices.”
Miami-based Lennar, the third-biggest U.S. homebuilder, fell 68 cents to $19.07 as of 4:15 p.m. in New York Stock Exchange composite trading. The shares gained 7.9 percent in the 12 months through yesterday, compared with a 10 percent decline in the 12-member Standard & Poor’s Supercomposite Homebuilding index.
U.S. homebuilders face competition from lower-priced foreclosures and weak demand as unemployment hovers around 9 percent. New home sales fell to an annual pace of 250,000 in February, an all-time low in records dating to 1963, the Commerce Department reported March 23.
Home prices fell an average 3.1 percent from a year earlier in January in the 20 cities tracked by the S&P/Case-Shiller index, the biggest year-over-year drop since December 2009, the group said today in New York. Washington and San Diego were the only cities where prices rose from a year earlier.
Home Orders Down
Lennar reported net income of $27.4 million, or 14 cents a share, for the three months ending Feb. 28, as the builder booked a lawsuit settlement, increased profit in its distressed asset division and cut homebuilding costs. Revenue fell 3 percent to $558 million and orders dropped 12 percent to 2,267 new homes, the company said in a statement today.
“The big takeaway is orders are down,” Jack Micenko, an analyst with Susquehanna Group LLP in New York, said in an interview after the report. “There’s no big spring.”
The year-ago home orders were boosted by government tax credits valued at as much as $8,000 for first-time homebuyers. The incentive was originally set to expire in November 2009 and later was extended for contracts signed by April 30.
The company sold more homes in January and February compared with December, Miller said. The second half of the year will show improvement compared with the same period a year earlier, when demand plunged following the tax credit expiration, Miller said.
“The comparisons should be better,” Miller said during the conference call. “And as soft a data point as this is, I think it is relevant that people start to see comparisons that are favorable and they start to get a little bit of confidence about the housing market in general.”
Meritage Homes Corp. (MTH), a Scottsdale, Arizona-based builder that sells mostly to entry-level buyers, has experienced a “lukewarm” spring selling season, analysts with Wells Fargo Securities said in a note to investors today.
“We believe February softened somewhat,” said the note by Adam Rudinger in San Francisco and Matthew Lambdin in New York. The month “was likely slightly disappointing relative to most builders’ expectations,” the note said.
Lennar recorded $29.5 million of income from a legal settlement tied to a dispute with Nicolas Marsch III, a San Diego-area developer who had entered joint ventures with Lennar. Marsch, who sued Lennar after the ventures lost money, hired Barry Minkow, an ex-convict and founder of a fraud-detection firm who released a report in January 2009 that called Lennar “a Ponzi scheme.”
Minkow was accused by federal prosecutors in a March 25 charging document of conspiracy to commit securities fraud against Lennar for spreading false and defamatory information about the company. Marsch was the unnamed Conspirator A in the charging document, according to Lennar attorney Daniel Petrocelli.
Lennar’s Rialto Investments unit, which manages and trades distressed real estate assets, contributed $11 million in operating income for the quarter. That compared with a $1 million loss a year ago.
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