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Earnings Preview: Lennar Corp.'s Fiscal 1Q Report

Stocks in this article: LEN.B

ALEX VEIGA

LOS ANGELES (AP) â¿¿ Homebuilder Lennar Corp. is expected to report fiscal first-quarter results before the stock market opens Tuesday.

WHAT TO WATCH FOR: How the builder's new home orders fared in February and any signs demand picked up this month. The trends could shed light on whether the traditional spring home-selling season is going to be a boon or a bust for homebuilders.

Homebuilders are hoping to see improved sales this spring after a dismal 2010 that marked the fifth consecutive year that new home sales declined.

Sales sank last year to the lowest level on records going back 47 years.

But demand for new homes so far this year hasn't shown much in the way of even a seasonal lift.

New home sales tumbled in January and again last month, sliding to an annual rate of 250,000 â¿¿ well short of the 700,000 homes sold annually that economists say is healthy.

While severe winter weather, particularly in the Northeast, has likely been a factor in softer sales, many would-be homebuyers remain deterred by high unemployment, strict lending standards and concerns that home values could drop further.

Last year, builders got a spring sales lift. This year, however, they won't have the aid of federal homebuyer tax credits to spur sales.

Keefe, Bruyette & Woods analyst Jade Rahmani expects Lennar will post a 3 percent drop in new home orders for the December to February quarter. He also anticipates the builder's home closings will be flat.

To hedge against housing woes, Lennar has been buying troubled loans and properties from failed banks through its Rialto Investments unit.

The company also is building less costly homes, completing each one faster and reducing sales incentives, which have helped to drive up gross margins and increase its bottom line.

WHY IT MATTERS: Homebuilders are a bellwether for the housing market and the economy. Each new home built creates, on average, the equivalent of three jobs for a year and generates about $90,000 in taxes paid to local and federal authorities, by some estimates.

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