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Earnings Preview: Lennar's 3Q Report

ALEX VEIGA

LOS ANGELES (AP) â¿¿ Lennar Corp., which builds homes in 17 states, is expected to report a profit for the third quarter on Monday, as well as annual increases in home orders, reflecting soft sales last summer after homebuyer tax credits expired.

WHAT TO WATCH FOR: How new home orders and closings fared during the June-to-August quarter. Also, how much the builder's Rialto unit, which buys troubled loans and properties from banks, contributed to the company's profit.

In addition, investors will be looking to see whether Lennar CEO Stuart Miller comments on the Labor Department's recently launched probe into the employee pay practices of large U.S. homebuilders.

Despite a lackluster spring home-selling season this year and weakening U.S. home sales, Lennar has reported a profit for five consecutive quarters.

A key factor behind the builder's profitability has been its Rialto unit. In the second quarter, the unit's operating earnings climbed to $9.8 million from $5.1 million.

For the third quarter, analysts estimate, on average, that Lennar's new home orders will post an annual increase of nearly 8 percent, according to FactSet.

Sales of new homes in the U.S. haven't fared much better this year than in 2010, when they fell to their lowest level dating back nearly a half-century.

New home sales declined in each month of the May to July quarter. In July, they fell 1 percent to a seasonally adjusted annual rate of 298,000 â¿¿ less than half the 700,000 that economists say represent a healthy market.

Last year, 323,000 homes were sold â¿¿ the worst year on records that go back to 1963.

High unemployment, larger down-payment requirements and tougher lending standards are preventing many people from buying homes. And some potential buyers who can clear those hurdles are holding off, worried that home prices have yet to bottom out. Builders also are struggling to compete with the large number of foreclosed properties on the market.

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