Lennar Corp., the third-largest U.S. homebuilder, Tuesday posted a drop in quarterly orders and revenue, signaling continued weakness in the housing market.
As the housing slump approaches its fifth anniversary, homebuilders continue to struggle with a heavy overhang of existing homes on the market and foreclosures that tempt buyers with more affordable prices.
Lennar's revenue fell 3 percent to $558 million while orders dropped 12 percent to 2,267 homes, missing Wall Street's consensus expectation by 13.7 percent, said FBN Securities analyst Joel Locker. Orders are a leading indicator for homebuilders, who do not book revenue until they close on a house.
Industrywide, U.S. single-family home prices fell for the seventh straight month in January, according to data released on Tuesday.
The Miami-based builder, which has operations in 14 states including most of the East Coast, Texas and California, said it made a first-quarter profit of $27.4 million, or 14 cents a share, compared with a net loss of $6.5 million, or 4 cents a share, a year ago.
Earnings were boosted by a legal settlement and other one-time gains.
Analysts on average were expecting a loss of 5 cents a share on revenue of $507.9 million, according to Thomson Reuters I/B/E/S, but it was not immediately clear if the numbers were comparable due to the high number of one-time items.
As a result of the weak orders, Lennar will probably have to increase the use of incentives — such as upgraded features or cash gifts to buyers — to move homes they have built in anticipation of more demand, Locker said.
"The housing market is still dismal," he said.
In the first quarter, Lennar offered $33,100 in incentives per home, or 12.1 percent of home sales revenue, about flat with last year.
Even at this late date in the downturn, sales and prices of new homes were still falling. Last week, the Commerce Department said new home sales fell 16.9 percent, putting the annual rate of 250,000 units at the lowest since records began in 1963. .
Homebuilders sold 1.3 million homes in 2005, the peak year for new home sales.
Lennar's shares were down about 1 percent at $19.55 in early trading on the New York Stock Exchange.
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