Lennar Knocks Down Optimism

Since then, defaults have risen on subprime and Alt-A mortgages, and the spring market for new homes has been weak.

Meanwhile, data released Tuesday shows home prices fell 0.2% in January from a year ago in the 20 largest metro areas of the country, according to the S&P Case-Shiller Index. A year earlier, the index had a 14.7% year-over-year gain.

"The annual declines in the composites are a good indicator of the dire state of the U.S. residential real estate market," says Robert J. Shiller, chief economist at MacroMarkets.

Detroit and Boston had price declines of 6.9% and 5.6%, respectively. Seattle and Portland were among the better markets, with respective rises of 11.1% and 8.7%.

Shares of other homebuilders were lower after the reports. KB Home(KBH Quote) was down $1.29, or 2.8%, to $44.70; Toll Brothers(TOL Quote) slipped 73 cents, or 2.5%, to $28.12; and Hovnanian (HOV Quote) fell $1.19, or 4.4%, to $26.15. MDC Holdings(MDC Quote) tumbled 3.6% after the builder was downgraded by Matrix Research.