Home Builder Sales Hurt by Unemployment, Foreclosed Homes

Lennar Corp., a home building company, reported an increase of 77 percent in its losses in the first three months of 2009. The estimated $155.9 million loss was announced by the company despite a surged in sales of previously-owned and new houses in February and March.

The company is blaming the increase in unemployment and house foreclosures rates on its losses and the decline of its revenue by about 44 percent or $593.1 million.

According to RealtyTrac, a company that collects and compiles foreclosure figures from more than 2,200 counties in the country, the nationwide foreclosed homes activity jumped by 6 percent in February of this year and 30 percent over the same month last year.

This increase in foreclosure rates occurred despite of moratoriums on foreclosed homes announced by several banks. And coupled with unemployment, home sales declined to a record level which affected home builders, particularly Lennar.

Despite the increase in February and March home sales experienced by Lennar, it still did not negate the fact that the company incurred $155.9 million loss during the first quarter.

Lennar Chief Executive Officer Stuart Miller said that the February and March sales increase may be a sign that the housing market is waking up.

However, taking into consideration the increase in foreclosed homes rate in February, Miller cautioned that it is still too early to tell whether the housing market is making a move towards recovery.

He added that the company is not expecting material improvement in the near future.

He pointed out that there may be indicators that the housing market is starting to stabilize, but it is too early to tell if they will become a trend.

The company’s new orders slipped by almost 28 percent while its completed home sales fell by 40 percent in the first quarter.

He cited rising unemployment and foreclosed homes rate, weakening consumer confidence and economic recession as factors contributing to the company’s poor sales performance.

On a positive note, the new home orders decline experienced by Lennar in the first quarter was smaller compared to the 46 percent drop it incurred in the last quarter of 2008.

Adjudged by the “Builder” magazine as the fourth largest home building company in 2008, Lennar has been trying to dispose its unsold homes. It is offering a fixed-rate mortgage of 3.6 percent on some of its unsold homes.

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