ALEX VEIGALOS ANGELES (AP) â¿¿ The spring home-selling season is off to a lackluster start, and a turnaround may not be in the cards until the second half of the year. That's the main takeaway from Lennar Corp.'s latest quarterly results, which offered a glimpse into home sales trends in February, the official start of the traditional peak home-selling season. Homebuilders hope to see improved sales this spring after a dismal 2010 that marked the fifth consecutive year that new home sales declined. But Lennar's results suggest the prospects for a strong seasonal lift in home sales may be slim. The Miami-based builder said Tuesday that new home orders fell 12 percent in the December to February quarter and home deliveries dropped 3 percent. The company surprised Wall Street by reporting a profit for the quarter, but the earnings came about as the builder cut homebuilding costs and other expenses. It also booked millions in revenue buying troubled loans and properties from banks. Lennar's bottom line also got a boost from a $37.5 million lawsuit settlement and other special items. Despite the profitable turn, the builder's homebuilding business continues to grapple with weak homebuyer demand. "The long-awaited selling season of 2011 has not yet defined itself as the beginning of a recovery cycle," Lennar President and CEO Stuart Miller said. It's still unclear whether home sales this spring will gain momentum or remain sluggish, Miller said. He noted that turnout by would-be homebuyers has been promising at times, raising hopes of a coming sales rally, but that traffic ultimately has not translated into robust sales. "It has been more of the nature of a head fake and has lacked any substance that might define a clear upward trend," Miller said. 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.
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 has likely hurt sales, many would-be homebuyers remain deterred by high unemployment, strict lending standards and concerns that home values could drop more. In addition, Lennar and other builders face a tough slog eclipsing their sales numbers from last spring, when temporary federal tax credits helped coax reluctant buyers to purchase homes, lifting sales industry wide. Sales tanked in the summer and remained weak through most of the year. Miller expects sales figures will improve in the second half of the year, when the industry's results will be measured against some of the lowest home sales figures in decades. He also expressed confidence that the builder is well-positioned to remain profitable in 2011. Lennar's results marked its fourth straight quarter of profitability. The company said it earned $27.4 million, or 14 cents a share, for the period ended Feb. 28. That compares with a loss of $6.5 million, or 4 cents a share, a year ago. Analysts surveyed by FactSet expected a loss of 5 cents per share. Lennar cut costs and expenses for its homebuilding division to $447.8 million from $502 million during the period. Its selling, general and administrative expenses fell 7 percent. The builder also recorded $29.5 million in income related to a $37.5 million settlement with a third party in a dispute between the builder and developer Nicolas Marsh III and his affiliates. And it recognized a $10 million, previously deferred management fee, among other one-time items. Quarterly revenue dropped 3 percent to $558 million, from $574.4 million, but topped Wall Street's estimate of $514.6 million. The builder's average sales price of homes delivered fell 7 percent, while the number of home deliveries dropped 4 percent, excluding unconsolidated entities, to 1,903 homes from 1,988 homes in the prior-year period.
Lennar's new home orders fell, but showed some strength in Florida, Maryland, New Jersey and Virginia. Orders fell across the builder's other markets.Lennar trimmed sales incentives to $33,100 per home delivered in the first quarter compared with $37,100 per home delivered a year earlier. Builders sometimes offer incentives such as upgrades on appliances or money buyers can use toward closing costs to help woo customers. But too many incentives can eat away at their profit. By reducing its incentives, Lennar has been able to drive up its gross margins and increase its bottom line. The company's Rialto unit, which buys troubled loans and properties from banks, posted a $23 million operating profit compared with a loss of $1 million, a year earlier. Lennar builds homes in more than a dozen states and is one of the nation's largest builders of senior housing communities. Shares fell 68 cents, or 3.4 percent, to $19.07 in afternoon trading.