Housing market may be stabilizing, Lennar chief says

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Though home builder Lennar Corp. had a rough third quarter, its executives seem to be seeing the light at the end of the tunnel for the company and for the housing market.

Chief Executive Stuart Miller launched his review today of the company’s third-quarter performance with several minutes about the general economy.

“We’re gaining confidence that we’re getting much closer to the end of this housing-led downturn,” he said. “A combination of low prices, lower interest rates and government incentives have worked to pique the interest of primary buyers and dispel the taboo about home purchases that has deterred so many from the market.”

Lennar divisions have seen an increase in traffic and general consumer confidence as the sales and pricing plunge has slowed or stabilized, Miller said.

But, he said, the future is still murky: Ongoing foreclosures continue adding to inventory, mortgage rates are fluctuating and tax credit programs are potentially nearing their end. Upswings in unemployment and gas prices continue to pose a downside risk.

“By no means would I suggest that housing is out of the woods and recovered,” he said. “To the contrary, many important headwinds remain.”

But the market, he said, “feels materially better than the absolute hopelessness that had existed for so long.”

Home buyers are gradually taking advantage of prices made affordable by the recession, Miller said. If the economy stays relatively stable, executives predict, the company will be profitable by next year.

Miami-based Lennar lost $171.6 million in the three months that ended Aug. 31, compared with the $89-million loss in the third quarter of 2008. Though orders for new homes increased each month in the quarter, creating the largest backlog since August 2008, overall they were still down 8% from the year before.

The average sale price was down 11% to $239,000, but increased demand allowed Lennar to drop sales incentives for buyers from $52,600 per home in the second quarter of 2008 to $45,900 in the third quarter of last year and finally to $42,200 in the most recent quarter.

Executives said before the economy fully recovers, they plan to limit the amount of speculative building by timing construction to match sales levels.

-- Tiffany Hsu