MIAMI ( TheStreet) -- Shares of homebuilder Lennar ( LEN) Lennar are rising by 6% in the pre-market on Wednesday after a first-quarter earnings report of narrower-than-expected losses.

The signs from Lennar were encouraging, though it might be a mistake to read Lennar's report as a sign of a steady and sustained housing recovery.

On Tuesday, KB Home ( KBH) reported relatively weak earnings that led to a loss on the day. KB Home shares lost 1.6% on Tuesday after it lost 71 cents per share in the first quarter, exceeding the loss level expected by the Street.

On Wednesday morning, Goldman Sachs lowered its KB Home estimates through 2011, with a price target of $19. KB Home opened Wednesday morning at $17.37.

Some analysts have expected KB Home to be one of the home stocks leading a recovery due to its focus on the California market. One line of argument dictates that since California was among the states first in to the housing crash, it would also be first to recover. Foreclosure data from California has been more encouraging of late, but KB's earnings did not indicate that the conventional wisdom was, at least at this point, well-founded.

KB Home's orders were up 5% in the first quarter, and cancellations were down from 28% to 22%. Revenues, however, were down 14% and the average home price slipped by 6% for KB Home.

Jeffrey Mezger, president and CEO of KB Home, said in the earnings statement, "A number of housing markets may be stabilizing or starting to rebound, though we do not yet see, in many respects, a sustained nationwide recovery."

What's more, the existing home sales report released on Tuesday showed another decline. Existing home sales fell 0.6% in February to a seasonally adjusted annual rate just above 5 million, the lowest level of existing home sales in eight months, and the latest mixed signal from the U.S. housing market.

Existing home sales have now declined for three consecutive months, though the February drop was by a much narrower margin than January's decline of more than 7%. The shrinkage has come after a bullish fall season for housing, stimulated by the federal tax credit for first-time home buyers.

The Lennar earning outperformance was significant: a four cent loss per share in the first quarter, versus a Street estimate of a 30 cent loss. Lennar revenues were also slightly ahead of analyst expectations, at $574.4 million, versus a forecast of $568.2 million in revenues from the Street.

Stuart Miller, CEO and president, guided investors to profitability for the homebuilder in fiscal 2010.

Yet Miller may be getting ahead of himself, and a true housing recovery, given the mixed signals from Lennar and KB Home and the continued slump in existing home sales. What's more, the tax credit for first-time homebuyers will expire in April, and while that should lead to another short-term bump in home sales, it may not assure a sustained recovery.

An analyst who covers Lennar but had not published yet on Wednesday morning said that it is still too soon to tell whether Lennar will reach profitability in 2010, but the first-quarter earnings were definitely ahead of expectations.

The homebuilder analyst said orders were ahead of expectations, and margins were 200 basis points above expectations as well. Gross margins spiked to 19.2%, from 6.5% in the year-ago period.

One encouraging sign from Lennar not among the earnings beat data was the decline in sales incentives that Lennar had to offer to move homes in the first quarter. Less need for sales incentives indicates improving pricing power for the homebuilder, an important housing market indicator over which KB Home disappointed.

Lennar's average sales price of delivered homes rose 6% as the sales incentives declined -- to $258,000 from $244,000. Sales gains were biggest in the West, particularly in California. Lennar reported that sales incentives as a percentage of home sales revenue dropped to 12.5% from 17.1% in the year ago period.

-- Reported by Eric Rosenbaum in New York.

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