South Florida’s Biggest Builder Won’t Halt Construction Despite Slower Market

The long-awaited market downturn has hit with the kind of force few anticipated.

Home builder confidence has dropped sharply to its lowest in 15 years. Cancellations are up. And new housing starts are down to a level not seen in three years. Worst of all, it’s hard for experts to tell when things will get better.

Yet Stuart Miller, CEO of Lennar, one of the region’s biggest builders, is not planning on slowing down, although he has downgraded the company’s earnings estimates for the year.

“It doesn’t feel like we can identify a bottoming yet. It happened very quickly, very suddenly. I can’t identify the trigger,” he said.

Last year the home builder brought in $13.9 billion in revenue, making it Miami-Dade’s biggest company. It also ranks among the top 500 in the world.

Lennar as dabbled in condominiums but largely builds single-family homes across the country, with Florida, Texas and California its biggest areas of concentration.

Over the past decade, Lennar has aggressively bought competitors and moved into new markets, taking its profits from $88 million in 1996 to $1.4 billion last year.

But now, the Florida real estate frenzy that propelled Lennar’s growth has cooled. Lennar has stopped hiring, and in recent months outlined its way forward in the uncertain market. The aim is to position itself for growth when the market picks up, but the strategy has drawn some criticism.

Lennar’s response: Keep building.

With Florida mortgage rates falling for eight of the last nine weeks after steadily rising in the previous six months, Lennar plans to finish building new homes in projects already underway. He also plans to offer buyer incentives and slash his prices to get the homes sold if needed.

It’s an approach shared by several home builders, such as Centex in Dallas and D.R. Horton in Fort Worth. Others, such as Pulte Homes in Michigan and KB Homes in L.A., are scaling back production but holding firm on prices until home buyers return — a strategy some have called quality over quantity.

Miller says he’d rather have cash now — even if there’s less of it – than sit on a house and hope it’ll sell for a better price down the road.

“With liquidity we live to see another day. When the market turns downward, opportunities present themselves,” he said. “It’s not that you make more money while the market moves down, but hopefully you’re able to do some things to prepare for the next upward swing.”

The biggest question now facing Lennar under Miller’s leadership is how long and deep the downturn will run. Miller said he’s convinced the South Florida housing market will come back — spurred by growing population, among other factors — but he can’t guess when.

Past housing bubble patterns have proven difficult for many home builders to navigate. In the early 1990s, the last major industry downturn, about 15 percent of the country’s 385,000 residential builders went bankrupt, the National Association of Home Builders estimates.

If you’ve paid any attention to the news in recent months, you know how badly home sales have declined. But builders are hoping for a silver lining — that a cooling market will open up a new pool of Florida mortgage loan applicants, jump-starting the housing rebound that will revive a lagging industry. For now, though, all they can do is wait and hope.