Florida-Based Home Builder Earnings Drop 73 Percent

Ouch.

Lennar Corp. said it will slow housing starts, sell land and cut prices after steep declines during its first quarter have left the national homebuilder unable to meet its earnings goal for the year.

First quarter earnings were down 73 percent to $68.6 million, or 43 cents per diluted share. For the same period the year before, earnings were $258.1 million, or $1.58 per diluted share.

The Miami housing market-based home builder said total revenue was $2.8 billion for the first quarter ended Feb. 28, down 14 percent from $3.24 billion logged last year. Revenue from home building decreased to $2.6 billion from $3.1 billion in 2006, Lennar said.

Lennar said its national operations were impacted by overall weaknesses in the current Florida housing market. Earnings from homebuilding operations plunged 69 percent in the first quarter, as cancellation rates reached 29 percent.

“While some markets are performing better than others, the typically stronger spring selling season has not yet materialized,” said Stuart Miller, president and chief executive officer of Lennar Corp. “These soft market conditions have been exacerbated by the well-publicized problems in the subprime lending market.”

Miller said that as the weak Florida mortgage market persists, Lennar has been converting both land and home inventory to cash and is “significantly reducing land purchases and starts.”

He called it the company’s “balance sheet first” strategy.

“Concurrently, we have adjusted our land assets where appropriate, while we have written-off option deposits and pre-acquisition costs on land we no longer desire to close,” he said.

Loss on land sales totaled $26.5 million in the first quarter, net of $21 million of write-offs of deposits and pre-acquisition costs related to about 4,000 home sites under option that the Lennar does not intend to purchase. This does mean, however, that potential Florida mortgage loan borrowers can receive incentives on new purchases.

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