Homebuilder Lennar makes money in 3rd quarter as deliveries increase, but new orders fall

Lennar returns to profitability in 3rd quarter

MIAMI — Lennar Corp. returned to profitability in its fiscal third quarter as home deliveries climbed and construction costs declined.

But the homebuilder said Monday that new orders fell 15 percent to 2,624 homes as the government’s first-time homebuyers’ tax credit expired.

Lennar and other homebuilders enjoyed a bump in sales this spring as affordable prices, low mortgage rates and two federal tax credits lured homebuyers into the market. But since the tax credits expired at the end of April, the number of people looking to buy has dropped, even with the availability of the lowest mortgage rates in decades.

Lennar earned $30 million, or 16 cents per share, for the three months ended Aug. 31. That compares with a loss of $171.6 million, or 97 cents a share, a year earlier.

Lennar said average home prices rose slightly to $240,000 from $239,000, while incentives were reduced to $30,600 per home delivered from $42,200.

Revenue rose 14 percent to $825 million from $720.7 million.

The performance easily beat the expectations of analysts surveyed by Thomson Reuters, who predicted earnings of 5 cents a share on $777.5 million in revenue. These estimates usually remove one-time items.

Lennar credited its revenue rise mostly to the increase in home deliveries. The company delivered 2,909 homes in the quarter compared with 2,660 homes in the prior-year period.

Aside from reducing construction costs, the homebuilder also managed to trim its selling general and administrative expenses by 4 percent.

The cost control efforts are necessary as many potential homebuyers have chosen to stay on the sidelines, worried about high unemployment levels and tightening credit standards.

Lennar’s backlog fell 12 percent to 2,173 homes. The Miami-based company reported a cancellation rate of 18 percent.

But Lennar believes it’s positioned to weather the current climate.

“Although challenges still remain in the housing market, we are optimistic that our core businesses are on the right track to achieving sustainable profitability as the housing market recovers,” President and CEO Stuart Miller said in a statement.

Miller added that while high unemployment and foreclosures present challenges for the housing market, “our communities have been less impacted than the broader market.”

Lennar has operations in 17 states and sells homes for entry level and move-up buyers as well as retirees.

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Lennar Corp.: www.lennar.com/