Lennar Knocks Down Optimism

Incentives represented 13% of the average selling price for home closings in the first quarter, matching last quarter but rising from 4% a year ago, Oppenheim said in a research note Tuesday. If management attempted to limit incentives at 13% of orders in the quarter, it may have resulted in the weaker numbers, he said.

For its part, Lennar said the housing market continues to show overall weakness.

"While some markets are performing better than others, the typically stronger spring selling season has not yet materialized," Lennar CEO Stuart Miller said in a statement.

"These soft market conditions have been exacerbated by the well-publicized problems in the subprime lending market," he said.

Lennar's news provides further evidence to back up the theory that the subprime mortgage meltdown that has crippled companies like New Century(NEWC Quote) and Accredited Home Lenders (LEND Quote) will have a meaningful spillover effect on new-home sales. Oppenheim believes that the lending situation may get worse for homebuilders.

"Our sense is that the tougher lending environment would have only started at the end of the quarter so that the impact will be more significant next quarter," he said.

On the company's conference call, Miller said that while these are already "difficult times for the homebuilding industry," it is "unclear today whether there is another shoe to drop."