(By Salman - iStockAnalyst Writer)Early on Tuesday, the country’s second-largest home builder Lennar (LEN) reported a third-quarter net loss of $89 million, or 56 cents a diluted share. This was the sixth straight quarterly loss for the Miami, Florida based company. In 2007, it reported a third-quarter net loss of $513.9 million, or $3.25 a diluted share. The home builder narrowed its fiscal third-quarter net loss on 53% lower revenue of $1.1 billion. Analysts had forecasted a loss of 55 cents a share on $1.3 billion of revenue.
Revenue from home sales fell 54% to $995.7 million. The company attributed the decline to a 49% drop in deliveries and a 9% decrease in the average sales price to $270,000. Lennar sold the most homes in Arizona, Colorado and Texas in the quarter. The number of homes sold fell 50% to 3,791 and new orders dropped 42%. The value of the company's backlog, or homes under contract and not yet sold, decreased by 53% to $1.05 billion. The company's results were hurt by $132.3 million in expenses, including writedowns for land, investments in joint ventures and write-offs of options on property it doesn't plan to buy. In the year-ago quarter, Lennar recorded $856.8 million in such expenses.
A Fortune 500 company, Lennar was top home builder in the East Bay in 2007, with 510 homes sold locally, giving it more than 8 percent of the market share.
Stuart Miller, chief executive and President of Lennar said “Consistent with our expectations, the housing market has continued its downward trend throughout our second quarter. Foreclosures have increased while higher unemployment and diminishing consumer confidence have defined overall economic weakness. As a result, the housing market has continued to experience growth in inventory levels, which has depressed the prices of homes and restricted the ability to sell those homes in markets across the country.”
However there were few bright spots in today's declaration: Gross margin on home sales, excluding valuation adjustments, rose to 18% from 14% due to lower inventory, product repositioning and reduced construction costs. Selling, general and administrative expenses declined 49% on layoffs and other cost-cutting.
The company has been particularly hit hard by what is seen as the worst US housing slump in decades. US home prices have continued to dropped and have been finding lesser buyers, ever since Subprime mortgage crisis came into the picture. Moreover, the current financial crisis, which has caused credit markets to freeze, is further threatening to send home prices crashing. In August, housing starts fell 6.2% to an annual rate of 895,000--the lowest since January 1991 and 33.1% lower than last year for the largest year-over-year drop since March.
Miller also called for government support to homebuilders and said “Although the federal government has recognized that stabilizing the housing market is critical to solving the current credit crisis, the government has yet to act meaningfully to help stabilize home prices."
When asked about US Treasury's $700 billion rescue package for financial institutions Miller said “Any commentary on that is premature,'' “Everybody is looking at it, and still trying to figure out exactly what it is".
On Monday, shares of Lennar Corp. (LEN) fell $1.03 or 7.50% to $12.71.
