Lennar blows away earnings expectations

The housing market recovery gains steam as buyers are lured by record low interest rates.

By Jonathan Berr Jan 15, 2013 10:41AM
Image: Aerial view of Houston neighborhood -- Ocean/Corbis/CorbisShares of Lennar (LEN), the largest homebuilder, were flat Tuesday morning even after the company reported earnings that crushed Wall Street expectations. The numbers underscore the growing strength of the housing recovery being spurred by record low interest rates.

Fourth-quarter profit at the Miami company surged some 310% to $124.3 million, or 56 cents per share, from $30.3 million, or 16 cents, a year earlier. Revenue surged 42% to $1.3 billion. Gross margins jumped 410 basis points to 23.5%. Analysts expected earnings of 44 cents on revenue of $1.31 billion. The company expects the good times to continue.

"Housing should continue to assume its traditional role in the broader economic recovery, driving employment upward, increasing consumer confidence and helping new homeowners accumulate wealth through home ownership, thus helping to accelerate economic growth," CEO Stuart Miller said in the earnings press release.

Lennar's earnings strength is the latest sign of housing's growing momentum. U.S. home prices surged 7.4% in November, their biggest year-over-year gain in more than 6 years, according to CoreLogic data cited by the Associated Press.  Economists surveyed by Bloomberg News expect the confidence index from The National Association of Home Builders/Wells Fargo to hit its highest level since 2006. Its easy to see why. As the Washington Post noted, about 1.3 million homeowners are no longer underwater, meaning their homes are worth more than their mortgages.

According to Trulia.com, asking prices for homes rose 5.1% in December on a year-over-year basis. That's an improvement from the 4.3% decline seen in December 2011. The housing market with the biggest improvement was Las Vegas, which was one of the epicenters of the housing bubble, where prices surged 16.2% as out-of-state investors flocked to the area, as Vegas Inc. noted.

Still housing prices have not climbed back to their pre-recession levels and may not ever. My wife and I found this out first-hand recently when we refinanced our mortgage. The appraisal of our home came in much lower than what we expected. Still, we were pleased not to be underwater, a situation that some of our friends and relatives will be stuck in for a long time.

--Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
Updated at 11:48 AM to add CoreLogic data.

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