One of the country's largest homebuilders, Lennar Corp. (NYSE: LEN), posted a loss for its second quarter this morning, and warned that the tough times are likely to continue. Shares of LEN dropped 3.0% in premarket trading after the news was released.This news really should not be too big of a surprise. Last week I wrote about how new home starts in May fell to a level that is 24.2% below the level they were this time last year. Another indicator of how tough things are out there, builder sentiment is now at the lowest level it has been during the past 16 years.
It's definitely tough times for American homebuilders. During the second quarter, Lennar reported a loss of 22 cents per share, excluding one-time charges, while analysts had been hoping to see the company show a profit of 5 cents per share. Not only did the company disappoint for the recent quarter, it has already warned of potential weakness ahead. In his remarks, President and Chief Executive Stuart Miller, stated that, "As we look to our third quarter and the remainder of 2007, we continue to see weak, and perhaps deteriorating, market conditions".
Sadly, as bad as things have gotten in the housing market, all signs are pointing to even more weakness, and some are estimating that what we have seen is merely the tip of the iceberg. Inventories are rising, loan approvals are falling, and foreclosures are escalating at an ever alarming rate. During May alone foreclosures shot up 90% and there is more danger laying ahead. Jonathan Berr reported earlier this month that in the near future there is going to be roughly $2 trillion worth of adjustable mortgage rates schedule to rise. This does not bode well and should create an even gloomier foreclosure picture spreading across the nation.
How long is the decline going to last? Right now it is hard to tell, but all signs are pointing towards weakness through the remainder of the year at the least. What about your area? How are prices being effected where you live?
Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor'sObserver.
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